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BlockFi files for bankruptcy as FTX fallout spreads

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Re: BlockFi files for bankruptcy as FTX fallout spreads

#421

Post by fallingknife »

weard_beard wrote: post #200
Animats wrote: post #177

Earlier quoted context omitted.

That's the crypto community delusion about how fractional reserve banking works. The way fractional reserve banking actually works is that banks lend out money, and the loans are their major assets. This only works if there's heavy regulation on how sound the loans have to be. Without regulation of loan quality, there's a banking panic every few years. All the US banking crises since the 1920s have involved some form…

The same could be said for FTX. There just needs to be regulation about how sound the self-created coin backing your margin needs to be. Without regulation of the soundness of the economic value of your self-created coin you get a crypto crash. Am I crazy? Are we not describing 2 identical problems and classifying 1 of them as fraud? The soundness of loans in a deregulated environment is no better than the soundness…

Soundness of loans can't really be regulated. Everybody who makes loans thinks that they're sound. They just turn out to be wrong sometimes. e.g the mortgages in 2008 we're thought to be solid because they were covered by collateral. But as it turns out that collateral wasn't worth what it was assumed to be.

This is not to say the space shouldn't be regulated, but all regulation on the soundness of loans suffers from this. e.g bank leverage limits rest on the same type of assumptions about the value and liquidity of different types of collateral. And if those assumptions are wrong they will fail no matter how solid the regulatory model says the bank is.

Re: BlockFi files for bankruptcy as FTX fallout spreads

#422

Post by UncleMeat »

Animats wrote: post #223
weard_beard wrote: post #200

Earlier quoted context omitted.

The same could be said for FTX. There just needs to be regulation about how sound the self-created coin backing your margin needs to be. Without regulation of the soundness of the economic value of your self-created coin you get a crypto crash. Am I crazy? Are we not describing 2 identical problems and classifying 1 of them as fraud? The soundness of loans in a deregulated environment is no better than the soundness…

Here's a tutorial on how to analyze a bank's balance sheet.[1] Few of the crypto clowns publish their balance sheet. FTX, we now know, didn't even have a balance sheet. [1] https://www.wallstreetmojo.com/banks-balance-sheet/

What, the big banks don't have "internal, poorly labeled fiat account" on their spreadsheet tracking their finances?

Re: BlockFi files for bankruptcy as FTX fallout spreads

#423

Post by stickfigure »

woodruffw wrote: post #240
christiangenco wrote: post #235

My wife and I had about 10% of our life savings in BlockFi. This is a pretty big blow for us, especially while gearing up to start a family. It's easily in the top 5 worst things to happen to me in my life. Is there any hope of individual creditors getting any of their money back? I'm unfamiliar with how bankruptcy works.

I'm sorry for your hardship. My understanding (which is not a professional or legal opinion) is that individual creditors probably come near last in these kinds of bankruptcy proceedings. It's possible that after a prolonged settlement process you may receive some of your money back, but that's not an outcome that I would place substantial faith in. I say this without an ounce of judgement, explicit or implied: can y…

Not the OP, but... in the abstract, 10% in a high-risk investment seems pretty reasonable? Sounds like they're young. For someone with a multidecade investing horizion, 10% is a minor fluctuation; the S&P500 is down 17% YTD.

To the OP: Why is losing 10% of your investments a pretty big blow? Almost everyone's 401K plunged by more than that this year. If you're young this won't be the last time.

Re: BlockFi files for bankruptcy as FTX fallout spreads

#424

Post by ntr-- »

varunprasad wrote: post #339
alasdair_ wrote: post #333

Earlier quoted context omitted.

>Only 1 of the BlockFi founders (Flori) has an ivy league degree (from Cornell). Zac is a moron who made his wealth playing poker and through a scam loans startup (Zibby). It's much, much harder to make millions at the poker table than it is to get a degree from an Ivy. There have been 141 people that have made over a million in 2022 from poker ( https://pokerdb.thehendonmob.com/ranking/7339/2 ) and that doesn't coun…

It's also much harder to make millions from the lottery than it is to get a degree from an Ivy. There might be a few hundred winning the lottery every year. So I'm not really sure what information the statistic that there are about 140 Poker millionaires in a year vs 75k Ivy grads conveys.

> So I'm not really sure what information the statistic that there are about 140 Poker millionaires in a year vs 75k Ivy grads conveys.

Poker is played competitively both online and in the casinos of every country all over the world 24/7. There are a phenomenal number of players compared to Ivy league students.

Unlike the lottery, it is also largely considered to be a game of skill based on a combination of statistics and social manipulation.

GP is generally implying that because the ratio of players to successful players is so small for a game so widespread that is is very difficult and requires a huge amount of skill to make a significant amount of money playing poker.

Re: BlockFi files for bankruptcy as FTX fallout spreads

#425

Post by somewhereoutth »

halpmeh wrote: post #411
lottin wrote: post #397

Earlier quoted context omitted.

I'm not redefining anything. I'm an economist, and I know the terminology of economics well. Capital can refer to two things, either 'capital' (or 'real capital') or 'financial capital'. The definition that you've posted matches (more less) the definition of financial capital. But, either way, this is not complicated. The fact remains that destroying money doesn't destroy wealth. Mistaking money for real wealth is a…

Ok, so I think we’re in the same page: there is a definition of capital that includes money but is for some reason not applicable to this conversation because you’re an economist and know better. And if you burn your money in your bank account, then you’re less wealthy but that cannot be referred to as destroying [your] wealth or capital.

To help out a little - money is only a signalling protocol for resource allocation. Nothing more. Burning the money in your bank account does not destroy any resources anywhere. It does, however, rather screw with being able to get some of those resources allocated to you.

Re: BlockFi files for bankruptcy as FTX fallout spreads

#426

Post by christiangenco »

stickfigure wrote: post #423
woodruffw wrote: post #240

Earlier quoted context omitted.

I'm sorry for your hardship. My understanding (which is not a professional or legal opinion) is that individual creditors probably come near last in these kinds of bankruptcy proceedings. It's possible that after a prolonged settlement process you may receive some of your money back, but that's not an outcome that I would place substantial faith in. I say this without an ounce of judgement, explicit or implied: can y…

Not the OP, but... in the abstract, 10% in a high-risk investment seems pretty reasonable? Sounds like they're young. For someone with a multidecade investing horizion, 10% is a minor fluctuation; the S&P500 is down 17% YTD. To the OP: Why is losing 10% of your investments a pretty big blow? Almost everyone's 401K plunged by more than that this year. If you're young this won't be the last time.

OP here!

Thanks for the affirmation. My wife and I are 31 so a 10% drop is definitely something we can recover from. We've already lived through this high-risk crypto part of our portfolio falling to half it's value over the last 19 months but the other half completely vanishing overnight has hit me psychologically harder.

Instead of the narrative of "sure the crypto dropped in value but it's done that before and gone back up and it's reasonable to think it could go back up again," "now it's on sale," and "time in the market beats timing the market," the narrative is just "it's completely gone because you got defrauded. Here's a list of the specific people responsible. You shoulda been more diligent in evaluating the risk of giving them your money ya freakin' idiot."

Re: BlockFi files for bankruptcy as FTX fallout spreads

#427

Post by somewhereoutth »

postalrat wrote: post #7
simple-thoughts wrote: post #3

With projects like blockfi, users get all the disadvantages of the centralized traditional financial system without any of the regulatory protections that have built up over centuries. Terrible for the people with assets in blockfi but extremely predictable. The point of defi is that you can use financial services without a centralized counterparty. People who can’t handle their own keys should be using traditional b…

What's the cryptocurrency endgame? Everyone has keys in cold storage waiting for the day we have the mathematics that destroys them?

The endgame is the same as Beenie Babies (or tulip bulbs). Everyone realises it was just a mania and goes home. No more money goes into the system, so no more money goes out. People forget about it.

Re: BlockFi files for bankruptcy as FTX fallout spreads

#428

Post by williamcotton »

Yizahi wrote: post #365
williamcotton wrote: post #344

Earlier quoted context omitted.

NFTs are probably the most interesting and legitimate use of these kinds of computer systems. For example, I could see a lot of value in specialized Yu-Gi-Oh projection card tables installed at game stores that only worked with officially issued NFT virtual cards. Players could rent out their virtual cards to other players and turn their purchases into assets. There are already companies in the MTGO space that rent o…

I have to repeat myself - your "YuGiOh virtual cards" are in no way related to the NFTs. Sure you can require buyer of a card to also buy NFT, you can even pretend that was a single transaction. But really NFT has zero function in this example, it provides zero value, and if you remove it from the system altogether - NOTHING will change. It's like saying that clapping with your hands at the gas station is somehow equ…

If the projection system in the game store requires NFTs that were issued by the creators of Yu-Gi-Oh then you would need these virtual cards to participate, just like how you need virtual Magic cards in MTGO in order to participate, the difference being that in the former it would be some open standard where people could trade, sell, and lend as they see fit.

Re: BlockFi files for bankruptcy as FTX fallout spreads

#429

Post by jzb »

propter_hoc wrote: post #16

Somehow these guys peaked at about 900 employees, according to linkedin ( https://www.linkedin.com/company/blockfi ) They've raised about a billion dollars of VC - https://www.crunchbase.com/organization/blockfi-inc/investor... (note, CB lists $1.4b, of which 400M is debt from FTX, which I imagine they never got) Unbelievable the amount of destruction of value here... it's just total carnage.

I think “value” is the wrong word here. These businesses created nothing of value, they were only exercises in accumulating capital and speculating on worthless currencies. This collapse was entirely predictable (and predicted). Agree on the term “carnage,” though.

Re: BlockFi files for bankruptcy as FTX fallout spreads

#430

Post by LawTalkingGuy »

badpun wrote: post #33
traveler01 wrote: post #25

Earlier quoted context omitted.

That's the thing, you only depend on centralized actors if you want to. The entire point of cryptocurrencies are to not depend on centralized institutions that can screw you over.

When designing the iPhone, one of Apple's findings was that majority of people struggle with understanding the concept of the file system (and hence, there's no visible file system in iOS). In such world, only a small minority of people will be interested in decentralized cryptocurrencies, as the bar of technical skills required is too high for most people. This is what led to the success of centralized cryptobanks.

You were never intended to craft your own blockchain transactions any more than to hand-write your network packets or interbank transfers. Wallets are/were expected to advance and handle this for users and mostly have.
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