Tag: ftx

Podcast notes – Solana with founder Anatoly Yakovenko – Bankless: $20M valuation for Solana at seed round “was ludicrous”

Guest: Anatoly Yakovenko, Solana founder
Hosts: Ryan Sean Adams and David Hoffman

2017 – was following crypto, wanted to build a faster crypto miner
Family left Soviet Union, saw the devastation of a bad currency and economy

Ethereum demonstrated an application platform

Qualcomm, Perl engineer who helped build platform for all those original mobile games

Mining crypto while building deep learning hardware
Had a eureka moment – encode passage of time as a data structure
At that time, it existed as a “verifiable delay function”
Quit job, met Raj Gokal
Raised $3M in seed, network price at that time was $20M – “thought it was ludicrous” – included Multicoin
5 cofounders, colleagues from Qualcomm
Built single node – was doing 100K+ TPS – prove potential of network
Raised $14M Series A in the “last vapors” of the 2017-2018 market
Competitors during that time were raising $100M+ (eg, Hashgraph)

Censorship resistance is like a communication channel – it guarantees delivery

Wireless protocols create a schedule – from X time to Y time, A gets to talk, then B gets to talk, etc
Very ordered and structured, gets you 100% utilization

Tendermint – 100 validators – each has 1 vote, there’s a known block producer who proposes a block, 2/3 vote on a block

Hired a lot of coworkers from Qualcomm who he worked with for 10 years

Solana thesis – smart contracts are good for finance, and finance depends on info propagating as fast as possible around the world
Solana data can move as fast as a piece of news travels

Currently ETH validators have same bandwidth requirements
With sharding the requirements will be reduced

Trustlessness comes from full nodes that can validate

Bitcoin and Ethereum see themselves as money – what about Solana?
Store of Value is a social construct, a meme, and important not to be tied to a sovereign (a nation)
The function of a token is to prevent spam

In PoS, once all full nodes have finalized, you can’t go back – you can only fork – which is a socially messy process

Store of Value that is awesome can be built on Solana, that can surpass bitcoin

How to bootstrap an ecosystem without piggybacking off Ethereum – was a huge unknown when Solana started

2020 – had 9-10 months of cash left, market crashed, thought they might be done

It was Solana’s second hackathon (Break Point) where he really believed they had something
Quality of builders went up, attendees went up

Solana was worth ~$100M at network launch

Thinks VC branding is dumb – most of the “crypto VCs” in last cycle were simply Ethereum ICO investors

Alameda’s balance sheet leak was first time Anatoly learned about the troubles

Sam had supported Solana a lot – especially saying they’d build Serum on Solana drove a lot of defi and builder interest

Bear market is a purge

Bitcoin supporters said Ethereum was full of mercenaries in early days — same criticism that Ethereum supporters had of Solana

“Getting through this phase sucks for sure”

NFT community is very thriving — second to Ethereum – very proud of it

Exhausted by negative news — want to see wins, see people building cool shit

David: Solana is one of only blockchains after Ethereum that has a second client (Firedancer + Jump)
Anatoly: you’re trading liveness for safety; Ethereum’s goal is 4 clients (can maintain liveness if 1 client goes down)

Still focused on monolithic chain with no sharding

Innovation in next 12-18 mos will probably be more than everything that’s come before in crypto

“Pretty sure” Solana can do more TPS than all ETH L2s combined

Cognitive Investments — a good geopolitics newsletter: “Russia has its fingerprints over the last three major global geopolitical transitions”

I’m enjoying their weekly issues. You can sub here: https://www.cognitive.investments/get-to-know-us

A few highlights from recent reports, including a very thoughtful and informed assessment of crypto post-FTX:

–

The late 1980s was “Peak Japan” – the West was obsessed with the notion that Japan was going to overtake the U.S. as the most powerful economy in the world. Instead, Japan entered a period of lost decades, while the U.S. presided over an era of globalization, expanding free trade, technological innovation, and (relatively) unrestrained American military power. These were not the only geopolitical conventions that turned out to be wrong. Germany went from Sick Man of the Euro (we can thank The Economist for that prediction) to center of a European industrial renaissance. China emerged out of Tiananmen as the newest and largest “Asian tiger.”

–

It was not until Russia invaded Ukraine in February 2022 that it became clear that the world had changed irrevocably – or at minimum, that global sentiment had changed irrevocably. (Aside: It is ironic that Russia has its fingerprints over the last three major global geopolitical transitions. The Russian Revolution brought us the rise of Communism and the Cold War. The collapse of the Soviet Union brought us U.S. hegemony. Might Russia’s failed invasion of Ukraine now open the door to the multipolar multiverse?)

–

Fiat money allows governments and central banks to be more flexible and strategic – they can design policies around interest rates and money supply without being dependent on what mining companies can extract from the ground. The downside of this is that money, whose value for so long had been based on an objective factor (the value of a precious metal), was now officially politicized.

–

In that sense, FTX may well be the beginning of the long-awaited clash between cryptocurrencies and governments – not because FTX is in any way representative of cryptocurrencies, but because it gives governments the excuse they need to crack down on them. It is unclear how many people lost money, or even their life savings, in the FTX debacle (an issue to societal stability in its own right), but you can be sure governments will use the FTX example as they aim to regulate cryptocurrencies into oblivion – or at least into becoming similar to other tradeable securities rather than as a fundamental threat to the future of money.

–

Max Weber once wrote that the state is defined in part by its claim to the monopoly on the legitimate use of physical force. I think we can add that the state claims a monopoly on the legitimate use of currencies within its borders. When the state decides to use the former to ensure the latter, we will see just how powerful cryptocurrency really is – and based on recent developments, it is a clash soon in the making.

SBF’s planned congressional testimony was wild: “I am, and for most of my adult life have been, sad”

Just sharing a few memorable excerpts below. Full testimony here.

—

b) In addition to being false, the claims do not make sense to me. Alameda Research’s own insolvency was triggered by a market crash, which in turn triggered FTX’s insolvency; it would have been absurd to create a market crash in order to take out 3AC, and then in turn bankrupt my own businesses.

7) Various claims that I created a hard-partying culture at FTX
a) Our ‘parties’ were mostly dinner and board games
b) I didn’t have my first drink until I was 21, and to my knowledge have never been drunk

b) I have a prescription for Emsam, and have for roughly a decade. I use it, daily, for its only on-label use as an antidepressant. It is not generally the case that people are expected to talk about their private medical conditions, but enough paparazzi have snapped photos of my belongings and theorized about it online that I guess I have no choice.

On Twitter, CZ claimed that “we decided to pull out as an investor” in a thread chalk full of lies.
a) In fact, I reached out to CZ in 2021 to initiate discussions about buying them out of their stake in FTX.
b) I initiated these discussions because, among other things, it was becoming increasingly difficult for FTX to operate with CZ as a significant equity owner. CZ was not cooperative in sending his KYC information to regulators that we were applying for licenses with.

c) The last few months have been difficult enough for everyone that it feels unremarkable to me, in comparison, that I need to put on the official Congressional Record that I am, and for most of my adult life have been, sad.

SBF (FTX) interviewed by Andrew Ross Sorkin – my meandering and annoyed takes

Worth watching in full. I’ve heard Stephanopoulos’s interview was harder hitting but haven’t watched it yet.

I downloaded an MP3 version of it, so the reactions below are based on his voice and replies alone and not body language, though I’m notably handicapped when it comes to eq:

—

Repeatedly distanced himself from Alameda, made clear he ran FTX but claimed not to know what was going on in detail at Alameda — beggars belief considering he owned 90% of Alameda and every prior Alameda CEO was Sam’s close personal friend or *perhaps cough cough* more

Tries to blame the collapse on leverage, which I assume is a hot button issue with regulators and easier to understand by the general public, but annoying that Sorkin doesn’t dig deeper into the obviously fraudulent evidence (like systemic co-mingling and improper usage of customer funds; Alameda front-running / VIP status on FTX exchange; taking out multiple BILLIONS in personal loans, where did those funds go?; the role of close senior execs including Nishad and Gary)

Within FTX structure, shifts blame to regulators (repeatedly claims FTX US and FTX Japan, etc, were ok and solvent because there were stringent regulations). It’s sorta like saying I stole my classmate’s lunch money because the teacher wasn’t in the room

With two Stanford law professors as parents, he clearly understands the importance and practice of “plausible deniability”

His public track record proves beyond a doubt that he is a very effective and disciplined communicator. Just read his many tweet threads. So why would we suddenly assume he’s NOT being disciplined and purposeful in conducting these interviews, despite his *claims* that his lawyers don’t want him to do this?

Hilarious bit at the end where he complains about hypocritical “do-gooderism”, when his publicly stated life’s work was to promote an over-intellectualized neo-facade of do-gooderism known as ineffective altruism. Merriam Webster literally defines a “do gooder” as “an earnest often naive humanitarian or reformer” gtfo of here

—

I hope he ends up in jail. I hope it takes many years before he steps foot in a cell, so he has to spend time and brain cells and stress and money defending himself in court and outside it.

But knowing how the American penal system works he’ll probably receive a light sentence served in a cushy minimum security getaway with plenty of utilitarian philosophy books and vegan couscous or whatever the f he pretends to eat

Random thoughts on the FTX scam implosion fraud

I’ve been following the FTX bankruptcy like a mouse in a cheese cupboard. Aside from bankruptcy lawyers, the clear beneficiary of this whole saga is Elon Musk because crypto Twitter usage must be through the roof if my own recent addiction is remotely indicative.

Some half baked thoughts as this saga continues to unfold, thoughts that I wrote in 30 minutes and are worth exactly what you paid for them:

I’m surprised that BTC and ETH – the ONLY two blue chips in crypto (and don’t let anyone mislead you into thinking there’s any other token that qualifies) – have held up fairly well, price-wise. Of course that may change before I even hit publish

SBF’s level of psychopathy is off the charts. Apparently the term “psychopath” is more accurate than “sociopath” because psychopaths have better emotional regulation and can appear more charming, whereas sociopaths are prone to rage and more erratic behavior. Perhaps SBF is transitioning now from psychopath > sociopath. I’m just a blogger what do I know

Prescription drugs are powerful. There’s a reason they’re “prescription”. And even with all that research and regulation, we still barely understand what they do to our bodies and minds. But it’s clear they’re doing something, perhaps quite powerful, perhaps quite permanent.

Crypto will survive and thrive in the long-term. Nothing fundamental has changed. This was a centralized failure, a massive bank fraud and trading scam. There’s a reason the two most mentioned comparables are Enron (a public corporation) and Madoff (a Wall Street investment fund).

Bear cycles are ALWAYS more painful than you expect. History never repeats, but it rhymes. In 2014-16, it was exchange failure and bitcoin clones. In 2018-2020, it was ICOs and China ban and regulatory fud. In this cycle, it’s comprehensive institutional failure – lenders, exchanges, and funds. Crypto has problems, many of them, and the criticisms are deserved. But the tradfi water we’re floating in is secured by a very fragile opaque aquarium. Swimmers beware.

The end game is approaching with accelerating speed, both in the broader global financial system, and for crypto’s own place inside it. This debacle will prompt hard questions and even harder regulations, but crypto continues its march towards global adoption and growing usage. The crypto tail increasingly wags the tradfi dog. Meanwhile the tradfi dog appears more and more sickly, limping behind its Central Bank owner.

Prices could dip another 50% from here, or we could see a massive wick up through some combination of a short squeeze, flight to quality (altcoins>BTC & ETH), Fed slowdown, and survivors’ euphoria. I don’t know. And if you have patience, it doesn’t really matter.