BlockFi files for bankruptcy as FTX fallout spreads • Hacker News Board

Re: BlockFi files for bankruptcy as FTX fallout spreads

#151

Post by weard_beard » Mon, Nov 28, 2022, 5:32 PM UTC

Yizahi wrote: post #139

skrebbel wrote: post #27

Earlier quoted context omitted.

I’m not convinced there’s any destruction of value when the entire value proposition is a lie. When I tell you my lemonade stand is worth a billion, and you believe it for a while, and then you realize it isn’t really, no value was destroyed.

Where do you start? You start with company that builds a lemonade stand, and they dress it up like a life changing lemonade that's going to replace all other drinks in 38 days or whatever. So let's ignore what it does, let's pretent is does literally nothing, it's just a stand. So what's next. This lemonade stand has some market price, it's probably not zero, right? Let's say it's 20 million dollars market price. May…

To be fair, that is how the entire fractional reserve banking system started. Safe houses for gold handed out slips of paper to make it easier for the guys storing their gold to spend it and said, "hey, we'll actually pay you to let us hand these slips of paper out to people who want to borrow your gold. We just need you to stay quiet and be cool with us committing fraud and handing out WAY more borrow slips than there is gold. Cool? Cool."

We as a society accept large scale fraud all the time and normalize it.

Re: BlockFi files for bankruptcy as FTX fallout spreads

#152

Post by joebob42 » Mon, Nov 28, 2022, 5:34 PM UTC

aww_dang wrote: post #132

bena wrote: post #57

Earlier quoted context omitted.

Eh. Words are going to word. People conflate ponzi schemes and pyramid schemes as well. However, I'm having trouble finding where it is not. Money paid out must come from new investors. If I buy crypto for $1, I need someone willing to buy it for $2 to make money. My returns come not from any utility, but from more people investing in it.

If I buy a baseball card for $1, I need someone to buy it for $2 to make money. If I trade lumber on a commodities market, I need someone to buy it at a higher price to make money. The new entrants condition does not qualify anything as ponzi scheme. Words should have meaning, or else what are we even talking about? A ponzi is a specific form of fraud where the promoter misrepresents where the profits are coming from…

For baseball card I basically agree, with the main difference being you won't reliably make money on a given card. Some will go up and make you money, but realistically it's a collectible.

For lumber, there is an end user who wants the lumber to e.g. make a house. There might be some middlemen who buy it and then resell it, but they are also generally providing value in some way: storing it to smooth over demand variance, doing arbitrage to improve pricing, moving it from one location to another, etc. There's never just an infinite chain of middlemen selling it for ever increasing prices.

Re: BlockFi files for bankruptcy as FTX fallout spreads

#153

Post by bombcar » Mon, Nov 28, 2022, 5:34 PM UTC

vkou wrote: post #126

ilamont wrote: post #80

Earlier quoted context omitted.

There are LPs behind a lot of these incompetent VCs dumping money into in crypto, including public workers' pension funds.

Those pension funds have a small part of their portfolio chasing high-yield investments. I don't cry crocodile tears when they overperform the SP500, and I can't say I'll be crying them when they underperform. ... Although given how frequently the Ontario Teachers' Pension fund has made the 'Pension funds invests into an incredibly dumb startup' news cycle, I suppose grifters, thieves, and conmen might consider them…

Some aren't so small https://www.linkedin.com/feed/update/urn:li:activity:7000201...

This would be between 5 and 10% or so.

Re: BlockFi files for bankruptcy as FTX fallout spreads

#154

Post by aww_dang » Mon, Nov 28, 2022, 5:35 PM UTC

nscalf wrote: post #9

For what it's worth, all reasonable people in the crypto space want regulation to make sure these types of poor lending practices don't continue. Regulators have been slow and ineffective when it comes to crypto, which has lent itself to the crypto v SEC narrative, but all the adults in the room known there is a need for some regulation.

The market is punishing bad actors with insolvency. Yet somehow the conclusion is that markets are not effective in self-regulation.

Re: BlockFi files for bankruptcy as FTX fallout spreads

#155

Post by gumby » Mon, Nov 28, 2022, 5:37 PM UTC

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.

> Unbelievable the amount of destruction of value here

Destruction of value or destruction of paper wealth? I'm pretty cynical of the whole crypto* space, mainly because I think the people making any money in it are themselves cynical and predatory.

I suppose that billion dollars of investment was actual cash lost.

* Using the new definition, not cryptography, which is what the term really means and will again soon.

Re: BlockFi files for bankruptcy as FTX fallout spreads

#156

Post by aeternum » Mon, Nov 28, 2022, 5:37 PM UTC

frgtpsswrdlame wrote: post #13

nscalf wrote: post #9

For what it's worth, all reasonable people in the crypto space want regulation to make sure these types of poor lending practices don't continue. Regulators have been slow and ineffective when it comes to crypto, which has lent itself to the crypto v SEC narrative, but all the adults in the room known there is a need for some regulation.

You don't 'regulate' a ponzi scheme (at least not in the sense that you mean regulation), you prosecute it.

Do you also consider fractional reserve banks a ponzi scheme?

We have successfully regulated those.

Re: BlockFi files for bankruptcy as FTX fallout spreads

#157

Post by Mistletoe » Mon, Nov 28, 2022, 5:38 PM UTC

vkou wrote: post #136

Mistletoe wrote: post #97

Earlier quoted context omitted.

Kraken actually handles money so it needs customer service and Twitter is just a bunch of already written code for posting stuff and sometimes (although much less now!) getting ad dollars. What do (did) 7000 people do at Twitter? I hate to ask the question because it aligns me with Elon whom I despise right now. But what do all the employees do at tech companies? I thought the beauty of tech and why the valuations we…

> Kraken actually handles money so it needs customer service and Twitter is just a bunch of already written code for posting stuff and sometimes (although much less now!) getting ad dollars. If you view Twitter as a 'service for posting 140 characters', they don't need 7000 employees. If you view it as a 'service for supporting five billion dollars worth of ad spend across the entire world', with all the proprietary…

It’s crazy how I bypass all that with simple adblockers. I don’t think I ever see ads on Twitter. Five billion dollars spent on information asymmetry from users that don’t know how to block ads. I guess I don’t even think about the ad part and workers needed for it.

Re: BlockFi files for bankruptcy as FTX fallout spreads

#158

Post by JackFr » Mon, Nov 28, 2022, 5:39 PM UTC

awhitby wrote: post #110

fdgsdfogijq wrote: post #91

Earlier quoted context omitted.

With all of the capital they have, you would think they would hire competent people from big tech. Instead they just find some stanford grad with a few years of experience to manage 50 people. It doesnt even make sense

It does if you consider self-selection: the competent person from big tech (i) can see a disaster a mile off (ii) has more to risk

I’ve seen that in practice. A non-crypto fintech I was at was acquired by a traditional lender and a number of staff took off immediately after the acquisition. A bunch went to FAANG (or FAANGish) places and a bunch jumped to crypto shops. In general the ones who jumped to crypto were either pure promoters or were able developers who had no understanding of finance, economics or the payments system.

Re: BlockFi files for bankruptcy as FTX fallout spreads

#159

Post by woodruffw » Mon, Nov 28, 2022, 5:40 PM UTC

Mistletoe wrote: post #157

vkou wrote: post #136

Earlier quoted context omitted.

> Kraken actually handles money so it needs customer service and Twitter is just a bunch of already written code for posting stuff and sometimes (although much less now!) getting ad dollars. If you view Twitter as a 'service for posting 140 characters', they don't need 7000 employees. If you view it as a 'service for supporting five billion dollars worth of ad spend across the entire world', with all the proprietary…

It’s crazy how I bypass all that with simple adblockers. I don’t think I ever see ads on Twitter. Five billion dollars spent on information asymmetry from users that don’t know how to block ads. I guess I don’t even think about the ad part and workers needed for it.

You (like me) are probably an outlier: over 90% of Twitter users probably use the Twitter apps, which make adblocking much harder (although not impossible -- people maintain mass ignorelists!).

Re: BlockFi files for bankruptcy as FTX fallout spreads

#160

Post by michaelt » Mon, Nov 28, 2022, 5:43 PM UTC

largepeepee wrote: post #52

skrebbel wrote: post #27

Earlier quoted context omitted.

I’m not convinced there’s any destruction of value when the entire value proposition is a lie. When I tell you my lemonade stand is worth a billion, and you believe it for a while, and then you realize it isn’t really, no value was destroyed.

There is value, in that a generation of moderately wealthy idiots got convinced that monkey pictures are worth something. Like a cult brainwashing, they have attached their identities to those worthless pictures and now are trapped in greedy stupidity.

Weren't all those ape NFTs brought with monopoly money anyway?

I mean, buying a $1M ape NFT with real money makes no sense - but if you were Sam Bankman-Fried and you had an unlimited supply of coins you knew to be worthless, you're just swapping something worthless for something maybe-worthless, which is much easier to explain.