SBF proves we live in post post post-modernism (clown world)
I'm sure most reading this probably have heard the news about the collapse of FTX and the ensuing crypto financial contagion it's caused. A lot of strange and bad analyses are being spread around crypto Twitter and elsewhere so Ben Basche (@basche42) and I try to describe a more reasonable account of the situation that doesn't flirt with fascism. During the interview we review and contextualize the series of events, the strange literalness of everything, and what the next steps are. We also ...
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Transcript
Hey. I, I donated to both parties. I donated about the same amount to both parties this year. That was not generally known because despite Citizens United being literally the highest profile Supreme Court case of the decade and the thing everyone talks about when they talk about campaign finance, for some reason, in fact, it's no one can possibly fathom the idea that someone in fact is actually gay dark. So I don't know. All my Republican donations were dark, if you won't see them. And the reason was not for regulatory reason. It's because reporters freak the fuck out if you donate to a Republican, Charles, super liberal and didn't wanna have that fight. So I just made all the Republican ones dark, but but we're second or third biggest Republican donor this year as well. But also, it's all for the primaries. They didn't give anything general options. They don't give a shit about general options. So it will matter. It's like, it's the primaries where the where you we can't do anything inside candidates.
I mean, the obviously striking thing about this clip is just the sheer literalness of SPF and him almost just saying out loud, what he's done. And and that's been consistent throughout the last few weeks where, he basically you know, like, oh my god. He just say it. It's like, you know, it's like, or he admitted. Like, it's it's like, it's just that continuously happening over and over again. This one, I think, you do see a bit of a difference in his his demeanor. This one, he didn't expect to go public. And in recent appearances, he's been, like, a bit more, like, contrite, but also sort of, like, playing that you know, playing dumb. Certainly here, you can kind of hear him sort of, like, talking about trying to work the system. Although, you know, this is not some sort of grand, again, like, brilliant conspiracy. He's doing kind of, like, logical establishment things, cozying up in kind of the ways in which someone who is trying to kind of buy their way into influence would do. It's all very sort of surface level. Like, it's kind of like this post post post I don't know which modernism experience watching this, this all unfold.
Yeah. I mean, I think so, like, the the actual so this interview, I think he knew it was recorded, but it's it was with this, like, crypto YouTuber. So she's not she's not really usually a journalist, but for some reason, like, I think if you if you go to, like, the end of this, entire thing, he you know, she she asked him, like, why did you choose me? And he was just like, I don't know. Intuition, I guess? Something like that. Yeah. It's so weird. I mean, that yeah. Like you said, it is so I I think he is genuinely being himself, but that doesn't itself, of course, like, forgive him of the amount of shit that he's done already. It just I think it just completely, for a lot of people, destroys this kind of simulation or or mirage that people have about people who are extremely rich and extremely powerful. And the fact that he is just saying everything outright that rich and powerful people do in order to gain influence. And, you know, it's like if you are aware of all these things, it's like, okay. Of course, he's he's going to do all those things, but it's also that I think it's just the the strangeness of his, of his confessions, I guess. The the literalness of his confession is like he's a a a literal villain
in some ways. Well, I mean, I I think it also, like, sort of debunks the kind of, like, politicized new narrative of this, whole ordeal. Like, I you know, like, he he he talks about giving to Republicans there, obviously, and, you know, his his partners also.
Yeah. And, you know, like Yeah. It was it's been up with his I think the CEO was his name, like, Ryan Salami or something like that.
Yeah. Yeah. Yeah. He so so he definitely, also, you know, was like a big Republican, a donor. So, but I think, like, this clip even is even more kind of, illustrative, because it's like, this is sort of not a partisan, thing. He's just sort of playing the current game, the current meta for, you know, the establishment. Like, right now, the Democrats are in charge. The Democratic kind of, like, you know, version inside of the blob of the establishment consensus is kind of the one in the driver's seat. And so, you know, like, what I hear there is just like a it's sort of like a yeah. Like, a bit sociopathic, kind of just like cold, but also, like, weirdly, like, earnest in a weird, like, like, strange way. Like like like cons conspiring out in the open. Right. Earnestly is like sociopathic. Yeah. It's just very emblematic of where we are as a society right now that they're like it feels like all the yeah. All all the all the the new crises are, like like, all more ridiculous than the than the last one. Literal sociopathy.
But, yeah, I think it's, to me, it's what is what was really distressing about the first, you know, the beginning of all this was the kind of, like, how conspiratorial everything got very quickly. Like, the amount of, you know, different crypto accounts, especially these degen trading ones, were like, oh my gosh. It's this, you know, communist cabal of Democrats who are like then, like, sort of flirting with antisemitism of just like, you know, that this was all sort of planned. This was all a psyop that, you know, that the Democrats were kind of planning. And then, you know, SBF goes and kind of, like, breaks this by being super literal about, yeah, I gave to Republicans, you know, in dark. I just didn't, you know, because journal liberal journalists like it matter. So, like, he also uses kind of, like, the language of the it's good, like, radical centrists whenever they want to to to punch at the left. And it's also, like, if you dig into any of the donations that I actually made to the Democrats, they were all, like, these, you know, centrist, candidates and who were running against progressives. So it's always funny to see, like, these these degen accounts and, like, how how quick they are to flirt with fascism and, like, of course, then, you know, was it, like, a month or two ago whenever they were they were, like, in love with Melania in in Italy? Yeah. I mean, I think one of the things that, I really admire about what you're doing is trying to kind of bring a different,
group of people into at least considering, you know, blockchain and and related technologies from from more the left side because, certainly, the, the existing people skew, you know, right right libertarian. And in a lot of ways, they've been able to kind of come up with incredibly powerful concepts and primitives that I, you know, I think you and I both see a a big potential in maybe beyond, like, what their, you know, initial creator's intent was. But certainly their, you know, ideological priors, make it very difficult for them to to perceive reality more than partially clearly at any given time. And, you know, this is not, to me, like, a a I think it's and also the fact that he hasn't been, you know, arrested yet, is another thing that's, like, been talked about a lot. And I and, like, you know, like, when Bernie Madoff was immediately arrested, like, it's definitely stands to reason that, like, the influence that he had may have blunted or slowed, the the SEC building a case or or some other regulatory agency building a case. And there does seem to be some reporting and evidence of that, but, again, it's it's sort of a bipartisan story on that front, if anything. But from this point forward, I mean, we're gonna see him, I'm very certain, in, you know, on the docket, soon enough. I don't really feel like, what we're gonna watch is sort of like a grand conspiracy like spy movie style. I think what we're gonna see is just sort of the most sort of literal car crash of a of a of a disaster for for for the, for the industry trying to kind of make itself, more serious in the eyes of the public.
And I think this is just, you know, this is sort of what it's gonna amount to. Right. So I think for this discussion, what I would really like to do is talk about, first, maybe give people, listeners, a kind of summary of things that happened, give our analysis of a type of, I guess I would say, more realistic or a better understanding of, kind of, what the events are happening and what's causing it because I think a lot of it has been not so great as far as the more conspiratorial kind of analyses that have been floating around on Twitter and such. And And then we want to talk I want to talk about the, recent published, article that you did on, in your mirror where you talk about some of the some of the ways forward based on kind of well, just like, you know, having a grounded grounded understanding of the reality that crypto is in right now, both the the good and the bad. But before we do that, maybe, Ben, do you want to give people, just a very quick introduction to who you are and, yeah, the type the type of stuff that you've been working on in the crypto world? Yeah. I'm, so I'm a product manager.
Was kind of in the general web two tech industry prior to about a year and a half ago, where I worked at an Ethereum wallet, and that was kind of my intro into crypto and web three. So I bring kind of a left political prior to, you know, everything that I do and, you know, kind of my values. And, you know, I've been a an observer and a and a sort of political, you know, Twitter addict just like everybody else for all these years. And, you know, from my perspective, Blockchain has obviously the sort of right wing slant to its origins. It has a lot of its most vocal supporters and and and, you know, the faces of the industry from the political right. But I actually do see, various pieces of the sort of decentralized computing, decentralized, blockchain and and and ledger technology, public blockchains, and and a lot of the ideas and technologies that come out of the space as having potential liberatory properties can be used by the left, can potentially change the material conditions in some marginal ways, of kind of the economy. And I think it's moving real value around is is a material thing. And as someone who is kind of a materialist first in my analysis of what's going on, it's kind of hard to ignore the potential material impact of of some of these technologies should they actually reach adoption. And and so, yeah, I'm I'm I'm working more on the the kind of product and business side,
of the industry and, you know, kind of networking and talking to, some of my fellow left leaning people in the space and trying to kind of put heads together and, you know, see what, this thing could actually become. Yeah. So I think it's, thanks for thanks for the introduction. I think what I think is, like, interesting about your particular position is that you're kind of from what I understand, I mean, I remember I think I was following you on Twitter and before you really entered into the crypto space, I'm curious to know, like, what kind of what was it that sort of convinced you or, like, yeah, that made you want to take the jump? Because indeed, if you come from a type of left wing tradition, because I know that you have a lot of, you had a lot of connections with, I think especially like the Michael Brooks show,
that's pretty rare. Like, I think you're, like, one of one of the very few people that I know that made that that kind of jump. Yeah. I mean, it was always kind of something that I kept an eye on, and I think it's in some ways, I have to back up a bit also because it it it touches just, like, gen my my, like, view on the general tech industry. So, you know, as, like, my my craft and my, like, day job, you know, like, my my skill set lies in in the tech industry. And it's always been a kind of right leaning, space as, you know, contrary to kind of I think we're finally seeing that, you know, in in in broad daylight now. But it's kind of always been that way. And so, you know, this is the thing that I do, you know, for a living. And so I'm always kind of, like, obviously, you know, that you can call it kind of, like, cognitive distance or, you know, whatever self justification. But, like, you know, I'm trying to see, like, where are the other angles and what are the things to consider about these things that are objectively kind of moving the material world around? Like I said, like, I think it was Leo Panas that talked about more from, like, the finance aspect, some of the issues with the left not having certain, you know, technical expertise. Like, look, you know, let's say we nationalize the banks. Like, what are we gonna do tomorrow with, like, a nationalized investment bank and, building capacities for, you know, operating parts of the economy. So that's my self justification for, you know, the my day job and participating in various, you know, capitalist tech companies and, you know, working in the kind of for profit crypto sector. And, and so, like so that's kind of my my general view on, like, technology on the left and at a very superficial level. But but, on the crypto side, it never really particularly, you know, sparked my interest, up until, you know, like a year and a half ago when a friend of mine who is a a a NFT collector kind of, told me to download, an Ethereum wallet, sent me some ETH and a an NFT. And I I sort of had, like, a very fun weekend going down the rabbit hole, in, like, you know, various NFT communities and trying out OpenSea to buy NFTs. And, it was a really just, like, fun and just fascinating experience. And then a, you know, a few days later, I ended up kind of getting contacted by the by the Ethereum wallet sort of coincidentally, you know, in a recruiting call. And, so I I kinda felt the industry, which, you know, like, had really piqued my interest for you know, on a superficial level, was kind of tapping me on the shoulder to pay more attention to it. And and so, yeah, I I really went sort of down the the general rabbit hole, you know, insert GIF of the the Neo matrix scene here, where he's doing the kind of training. And I think it was probably Uniswap itself that really broke my brain when I first dropped it. I think, you know, Uniswap, for those who don't know, you know, it's like a decentralized exchange and implemented first on Ethereum. And it is, essentially a vending machine that kind of lives autonomously in a cloud that no one controls and rolls on essentially moving, you know, billions of dollars of rent of, trading volume, essentially, autonomously. There is this sort of Uniswap governance, of course, where and and there's lots of kind of complications with US securities law and how that governance is able to kind of operate, and interact with, sort of decentralized contracts. But, like, at the end of the day, it was as soon as I grok the fact that, hey. This thing is like a piece of code that, like, does something for people. You know, right now, it's, like, primarily a speculative use case, but this is a general technology, and the same content could be applied to to various other things. But this thing was just, like, running on its own. In some ways, it the code itself is an ownerless machine. And and that really sort of, like that was kind of the moment where I was like, okay. Like, you know, DAOs, decentralized compute, decentralized applications, you know, technology for collectives and regenerative, agriculture, re commenting. You know, I sort of saw the the non speculative side. And, you know, that's what really sucked me in, I think. That's interesting because I think,
when most people on the left I find, like, if I try to like, if I bring up something like Uniswap or these other examples, like, yes, they're all kind of finance related. So generally, the immediate reaction is like, why why should I care about that? You know, it's, it's it's it's it's money related, it's finance related, and we're against that, so we shouldn't we shouldn't care about it. But I think what I'm guessing it's maybe because of your already, like, already having that experience in tech, kind of the implication, not necessarily of the surface level use case, but sort of the underlying infrastructure or the implications of that infrastructure. It just so happened that it is using that infrastructure for the speculative use case. But the the thing that is probably much more interesting is the fact that it's it will keep existing no matter I mean, as long as the blockchain keeps existing, which is like a fairly powerful idea if you try to think about that in the context of, for example, left wing organizing or other things that the left is generally more interested in.
Yeah. Or, you know, actual pieces of the economy. You know, I'm I'm very fascinated with the the Mondragon Corporation, of course, and and collectives and, and and cooperative businesses and and kind of the intersection between those and labor organizing and and the idea of, you know, like, parts of the economy which potentially are more vulnerable to self reorganization, by, you know, parts of labor, and potentially with, you know, like, certain aspects that are, like, digital or, like, low capital required to kind of start them up, like, services marketplaces, for example. Like, I love to see a a real you know, like, these these these driver cooperatives for, competing with Uber. I think that, right now, we haven't really seen blockchain be used to kind of enable, incentivize, expand, or scale, or coordinate something like that. I think that as probably over the next few years as, like, the, like, tokens and the financial and some of the also, like, the the the limitations from a a technical standpoint sort of melt away as the so called scaling debate, in blockchains becomes, you know, much less relevant. I think that once we have these kind of, you know, somewhat invisible thing, you know, tokens, NFTs, you know, smart contracts to organize and and and kind of, you know, like, multisig wallets to organize, you know, the control of resources and the voting around the control of those resources. Like, I think that we very well may see, you know, interesting applications when it comes to, like, the real economy and real you know, again, we're not talking about all of production becoming decentralized and sovereign, whatever that means in terms of, you know, like, there are real, like, material constraints and capital constraints to to to doing certain things. But services, is interesting and and and various forms of, obviously, expression and and and and mutual support, mutual aid, and and coordination, I think, is is definitely, possible. Whether that's inevitably gonna happen, whether the left will sort of kind of give the benefit of the doubt enough to kind of tinker and and play with some of these ideas and and and participate and and see the possibility, whether, you know, the industry itself self immolates again, you know, after, you know, what's recently happened. But I certainly think the potential is there.
Yeah. I think what is kind of, a frustrating maybe idea for me to kinda convey is that a lot of the at least my my feeling, and I think you have the same as well, is that a lot of the kind of technical limitations that may exist right now, I feel that a lot of them are going to be probably fixed or probably, like, improved upon, like, pretty significantly in the coming years. Like, I think that there's, like, a decent likelihood of that. But that's not really where, like, the hard thing is. The hard thing is just, like, yeah, getting people on the left to not react so harshly whenever you bring up the, like, small possibility that maybe some of this stuff is helpful.
Yeah. Yeah. And I think it's also I would also say, like, there's a there's a degree to which this, I think, to some extent, might be an opportunity for capital to hoist itself by its own petard and kind of I I think that the Internet's impact overall on society was probably reactionary. Like, if we summed it all up, at the end of the day, right now, the the scoreboard kind of points reactionary. And so, you know, I'm very sympathetic to the idea that, hey. Like, you know, what's to say that the next Internet wouldn't also, you know, follow the same path? But it's also kinda without a doubt that the the Internet has also made society and the current situation much more liquid and hard to predict by the ruling class, by the you know, which is itself decentralized and and, like, you know, coordination over kind of, like, older mechanisms of, you know, networks of of of patronage and networks of kind of mutual, interests, were definitely disrupted, and kind of you know, again, the word is, like, in my mind, I think liquefied a bit by the by the Internet. And I think, crypto has a has a very strong possibility of having kind of similar effects where the unpredictability of if we go back to ideology, kind of something that, is sort of like, hey. Like, things should be open. Things should be democratized. Almost by, like, drinking the full Kool Aid of that, there's, I think, some extent to which they're letting genies out of bottles that they don't mess like, the the full impact, I think, of certain thing, you know, certain things being able to be organized. You know, for example, I just think, like, a fully decentralized application, for, let's say, social networking that is, like, completely uncensorable, and cannot be taken down. Like, that has a lot of, like, other, you know, implications around, you know, harassment and misinformation, and there's a whole kind of debate around, like, how how moderation works in in a world like that. But the kind of fact of if these open networks are sort of, put forward maybe by right leaning, you know, forces, in order to kind of, you know, allow for the kind of open, exchange of, information of bits of computing. And those financial applications are kind of the basis on those of of those cases that are that keep these spaces open, for example, in, you know, code as speech, which I think is, like, most likely, probably, like, a good thing for the left. And, like, the left should, like, embrace that as, you know, having, like, implications and complications. But, like, fundamentally, we really do not wanna get into, you know, shutting down what kind of websites people can run and or and how they can organize. And and, yeah, I I just sort of think that it's it's hard to predict the full impact of, of technologies like this. And it's not just blockchain, by the way. There's, like, decentralized compute. There are projects going on that have, like, nothing or little to do with blockchain. There's decentralized storage and, from the, you know, IPFS network. So I think that, there is, like, a degree to which certain unpredictable, potentially liberatory and and kind of, you know, definitely destabilizing, and that can be good and bad. You know, effects may may result from from something like this.
Yeah. I think the way that I see it is kind of like, Schumpeter has this idea of creative destruction, which he basically took that he created, like, after reading Marx. But, you know, how capital sort of reinvents itself over and over again, that sort of new forms of capital take over the old forms of capital. But I think in that process, there are always like, it creates, like, these cracks that we're seeing, I think, more and more. Like, it it's what is creating this unpredictability because, sort of, this, intra bourgeois sort of, battlefield is sort of happening. I think there are these cracks that are sort of being made and I think, you know, if the Left doesn't also adapts to these type of this creative destruction sort of happening and doesn't sort of push or insert itself into these cracks, then you're just creating a sort of self fulfilling prophecy that's, oh well the Internet is right wing therefore it's, you know, all these new things are also right wing and then it'll become right wing because only the right is sort of in it and has any power over anything. And so like by by saying that know, all these things are right wing and it will continue to be right wing, then, of course, that will be the case because you're doing fucking nothing about it.
I I think one thing that that draws that draws people into crypto and and Web three and something which is maybe shouldn't be underrated by the left is there's a degree to which, like, there's not a lot of agency and action in, like, a lot of our lives in a lot of ways at kind of the points in capitalism, the points in society that we're at. And crypto, both in terms of kind of the, you know, the token economies and NFT and things that you can do as well as, obviously, things that people are building. And some and a lot of you know, I they're aware I think of, like, many, many, like, not just nonprofit, but, like, you know, fully mission driven kind of, like, altruistic organizations that are, like, building and maintaining, in, like, very democratic and egalitarian ways, like, core pieces of, like, for example, you know, the Ethereum infrastructure and base layer. But I think, like, one of the things that that crypto and Web three sort of, in what what way it feels different than kind of everything else going on is there's kind of, like, vectors and degrees to which people are are able to act. There's, like, action involved here. Like, people can organize a small you know, like, a a kind of, like, neighborhood, you know, like, unemployment insurance fund or whatever. Now is that, like, totally dystopian in this in in in the, you know, in the phase of, like, retreat that the left is in that, like, these kind of self organized things are are are maybe the only thing that, is going on on that front. But I think that, this ability and this, like, place for people to act, in, you know, limited and constrained ways, but deploying a contract as an act, you know, like, sort of forming a sort of, you know, shared wallet between whatever, like, you know, like, the things that you're doing at Red Chain, for example. Like, these are experiments, that can potentially touch the real world. And I just think there's something to be said about both, like, how that draws just generally people into the space, not just from, like, a left or a political perspective, but, like, this is an arena in which we can take action on certain things. And sometimes that action is, like, getting rubbed and, you know, it's like whatever. But, and there's a lot of consumer protection problems that are therein. But, you know, nevertheless, I think, you know, do do I think this is, like, replacement for political organizing, union organizing, and, all other types of political struggle? You know, absolutely not. I think it's, you know, probably a relatively small part, even in the most optimistic scenario for for what this tech could be, but it certainly is a substrate where people can, take action in a in a plane that that really should be contested. Because if it's not, like, to your point, it's really just, you know, the right wing's tool.
Yeah. Well said. Completely agree. So yeah. So I think one of the you know, like like you've talked like you mentioned before, at least some of consumer protection problems. And, you you know, we were talking about But speaking of that. FTX. So maybe what I would like to do because, indeed, I think and maybe we'll talk about this afterwards, but, like, there I think what is something to to sort of convey, I think, is sort of, like, the difference between sort of centralized entities that may use decentralized infrastructure and how that differs from a centralized entity building on top of centralized infrastructure. I think in the case of FTX, maybe I can just, like, very quickly for people who may have no idea what's going on because the entire story is incredibly complex, and it's incredibly stupid in many ways, and just, like, makes you feel like you're living in clown world. So I can like just very quickly go through some of the most important things that happened, and you know feel free to jump in if you want to add anything or if I get anything wrong wrong or whatever. But so, FTX is or it was the, I think, second largest exchange in the world by market cap, and fairly recently it Third, I believe. Or third. They went bankrupt after, like, this kind of, like, very strange series of events happening. And for a long time before that even, FTX was sort of not very well liked by the greater crypto community because people saw the the founder, whose name is Sam Bankman Fried or SBF, they saw him as kind of being like this, guy that was trying to, well, he had himself a lot of influence compared to other sort of crypto people because he was given, like, these different he was able to speak in front of, like, the Senate or the Congress in The US. He was able to propose different he was in the middle of proposing different regulations to the US government. And so a lot of people, especially the libertarians, really didn't like what he was doing because they thought that his the regulations that he was proposing were very bad and, you know, they were, being proposed in ways that would sort of benefit his company, FTX. But FTX, you know, what was really interesting as well, FTX was an exchange online where it was a centralized exchange. So you had to you could give them money and then you could sort of trade and sell cryptocurrencies and they also had a you can margin trade and do all these things. But they also had a sort of, a VC firm arm or, I guess, investment arm called Alameda Research.
It was a it was a hedge fund and a proprietary trading arm as well as kind of, like, allegedly beforehand, what was called a delta neutral market maker. So they were really just sort of almost sitting on both sides of trades. And I think one of the, you know, big shifts over the last year and a half was, like, that reputation become they're just becoming a trading shop. So, yeah, it was an exchange essentially that, was funded, as I understand correctly, from the initial trading profits of Alameda Research. So it sort of sprang from, Alameda Research. And in fact, at the beginning of the the life of FTX, like, early clients would wire money directly to Alameda to get a, a credit on FTX and begin trading because they I think it was they they couldn't get bank accounts yet. There's a lot of sort of regulatory, like, jurisdictional things with FTX as well. Like, they had their main, subsidiary or or their their main holding company was based in The Bahamas, and it had subsidiaries around the world, including FTX UX US, which was, like, much more regulated than than the the the global version. The global version was the one that that ultimately was, like, the kind of vector for the contagion because the the some of the regulation in The US and this scrutiny kind of kept that from from from becoming, an issue there. But, of course, the the vast corporate spiderweb structure, anchored by FTX and Alameda, everything kind of went down as,
the last few weeks unfolded. Yeah. So I think what is interesting or kind of well, in in a bad way, is that Alameda, like, I think in most cases, like, the in in the traditional finance, this would be completely illegal for the same company to have both an exchange and, you know, a hedge fund, basically, also to be able to trade on their exchange. And the reason being basically because of what resulted, happening afterwards. Yeah. But so if I just go quickly through some of these main points. In On November 2, Alameda Research, they had their balance sheet sort of I think someone, like, had had leaked their balance sheet. I believe it was CoinDesk. And it showed that most of their assets were in FTT, which was their own token, and they were backing a lot of the loans that that they would be taking out. And, you know, they would basically use FTT as collateral. So there's, like, a huge, you know, conflict of interest where Alameda, who is, you know, under the same company umbrella as FTX, owns so much of the FTX token. And so that sort of, like, caused a little bit of a of a stir because I think people were kind of concerned with how that balance sheet looked. Caroline Ellison is the was the Alameda CEO at the time, who also happened to be a, I think a previous or current girlfriend of SBF who was in, like, this polycule in his Bahamas, penthouse of, like, 10 people. A lot of strange stuff there. Well, she mentioned that on Twitter, I believe, or, I believe it's on Twitter, saying that 10,000,000,000 of assets were not being reflected in this balance sheet, as a way to sort of calm down, you know, what people were speculating on. At the same time, you have another the CEO of Binance, which I believe is the biggest exchange. His name is CZ. He announces on Twitter that he wants to liquidate all of the remaining FTT that he had received because they had invested in FTX previously. There was also a lot of, like, bad blood between, CZ, the CEO of Binance, and SBF, the the CEO of FTX, due to other, like, you know, drama that we don't really need to get into. So there was a lot of, like, tensions between that. Caroline Ellison responds that she will, she would love to buy all of the FTT that that they want to sell at $22 OTC, so over the counter. What that sort of signals, I think, to a lot of people is that $22 is probably, like, a very, particular price in which Alameda probably needs the price
of FTT to stay above. Yeah. Otherwise, they get other so, like, basically, what happened is they they it's what appeared to happen is they they were gonna be liquidated under I think 22 was the original level, and it actually sort of broke down at a lower level. If I'm that was sort of like a a very strange, like, seventy two hour period where the hold was, like, one giant day. So it's kinda hard for me to remember exactly how it went, went down. But, but, yeah, the the, Alameda was basically taking a loan out against the FTT tokens, that it that it held, which were the FTT tokens was really just like a token for a discount on the FTS exchange. It had, like, a $9,000,000,000 market cap, right before all this, went down. So this was, like, the primary asset on Alameda's balance sheet, which was leaked. And the fact that this being the primary asset spooked everyone because everyone knows that there's some extremely fundamental relationship between Alameda and FTX that is not kind of, like, fully out in the open. And that was kind of the beginning of, like, the crisis of confidence, where if this asset fell below and CZ's tweet kind of initiated this run on the FTT token, and that basically forced the value of the collateral for the kind of, loans that were keeping Alameda afloat from what looks to be kind of like a potentially six plus or, you know, month hole, potentially starting around the collapse of of Terra, it looks like, in a cascade of financial contagion that that is only really,
rearing its head now. Right. Yeah. So part part of part of this entire thing as well in the background. This story is so complicated sometimes. But, like, you also have, of course, the the collapse of Terra Luna, which I think Alameda was pretty heavily invested in as well. So, like, it was, I think, strange at first that they were able to stay alive after the crash of Terra Luna and then that they also bailed out a few other, crypto companies like BlockFi, which is has now, declared bankruptcy. So I think it was a bit strange. It was like, how do they have so much money? I think people were kind of, like, also, like, wondering about the math behind that because it was such a huge crash. And so, like, it is only it just took, like, you know, a month or so more, for all this contagion to start to start spreading.
Yeah. I mean, I think the the thing that to be aware of around, the way that it blew up was so the the the mechanism I think one of the key facts of, like, obviously, the the criminal or whatever investigations going forward is gonna be, like, what was the intent and what happened? And I think, like, you know, SBF continues to evade and say in interviews that he's like, he didn't touch customer funds. But what I think is important to like, what I sort of learned in the past
You see, he just fucking squirms every time he's asked that. It's like, I think
no. I mean and I think and I and I think I think I sort of get now what the mechanism was, which was basically Alameda was a trader on FTX's exchange as well. Like, they had a lot of positions and made markets on FTX, etcetera. They lost huge. And normally, what would happen if you were a trader that got wrecked that hard is and you were on leverage is you'd be liquidated. But essentially, what seems to have happened, because if you didn't, the exchange would essentially be taking on, like, an unlimited you know, like, your your losses become the exchange's losses because they're essentially, like, you know, backstopping this, like, fictional line of credit to you that that in this case, it looks like they, like, hard coded an override for an exception for for Alameda, which basically meant that Alameda was just like trading on funny money, getting deeper and deeper into the hole. And then when the kind of, run on the bank, if you will, quote, unquote, because, happened, the money basically that would have gone back to, those, you know, out the outflows to those customers, was essentially, like, it needed to be that amount plus Alameda's losses, which is essentially what forced the thing into bankruptcy. So that mechanism is a bit arcane. I might have gotten, like, some details wrong, but that's the sort of way in which I think yes. He did he, like, touch customer funds, you know, directly, you know, maybe and probably, but, like, the way that it sort of happened was this sort of linked together exchange and prop trading desk, which they basically just, like, tried to sort of use, like, a god mode cheat on and then, like, make it all back. And it ended up essentially being the backdoor where all the kind of, customer funds, like, flew out.
Right. What is so funny is that they were basically playing god mode and they fucked it up. Yeah. Like, they they, you know, they were in such a position that they did not have to do a lot of the things that they did or take such risky positions that they needed to take, and they still, you know, like, they they would have made money forever.
That's probably important to to to talk about for the people who don't kind of know the inside baseball is the reputation of FTX. So there's one side of it, which was the sort of, like, you know, the kind of the willing regulated entity or, you know, that whole virtue signaling thing that he sort of talked about on the the the lead call. There's also, though, in the crypto community, you know, particularly on the Alameda side, but even, you know, from from Sam's perspective, of him being sort of this, like, absolutely ruthless operator and Alameda being, like, the most profitable shop, in crypto and the fact that, you know, there's, like, very you know, like, there there's, like, these these tokens that, that they invested in and then kind of, like, dumped at the absolute right time. And, there's ways in which they did this liquidation engine that I talked about in in other cases was used to kind of buy Alameda, allegedly to, to, you know, make outsized profits in in ways that maybe aren't even, necessarily illegal. But I think, like, yeah, they have this part of the confidence game and part of the the way in which this dragged on kind of, you know, rigor mortis almost of six months after the initial kind of financial, wound was yeah. Sam's, you know, reputation as kind of, like, this sort of magnanimous, you know, whatever, you know, type of guy, but also the kind of cutthroat the cutthroat kind of, you know, Wolf of Wall Street reputation of, FTX and Alameda as just like being like, well, he's a you know, he's an SOB, but, you know, they're they're the best out there. And, it turns out, you know, them and a lot of others, like, three hours capital that had similar reputations in the industry were, you know, proven to be, like, complete, idiots when the whole thing came came crashing, after after rates were were increased. And, yeah, like, kinda to your point earlier, like, oh, wait a minute. Like, nobody here knows what's going on. Right. Yeah. I think in general,
like, people really, really underestimate
sometimes how actually really stupid the people at the top are. I think it's kind of the the thing that I'm always, like Yeah. Coming back to. In this case, I I definitely think like, it seems to me, like, at the end of the day, that initially they got wrecked from being hubristic and, you know, way risk taking. Then they started doing a series of kind of, like, probably, like, self justified things that were essentially crimes to kind of, like, cover that up. And, you know, whether that's a combination of hubris or amphetamine use or, you know, the access to the heights of power that they had, it kinda made them think that they could sort of, like, have the perfect plan and make it all back in the next, bull run or whatever. So it's you know, to me, it's it smells like crime, but not kind of like a grand conspiracy and a great narrative, crime. It's it's an incredible story, an incredible blow up, but, like I said earlier, it's sort of like a a very literal stupid, on its face thing that, you know, is maybe the kind of crisis that we're gonna be getting from here on out.
Hey, everyone. If you're enjoying this episode so far, be sure to subscribe, leave a review, share with a friend, and join the crypto leftist communities on Discord or Reddit, which you can find links to in the show notes. If you're enjoying the interview or find the content I make important, you could pitch into my efforts starting at $3 a month on patreon.com/theboxingsocialist, which really helps since making the stuff isn't free in terms of money or time. As a Patreon, you'll get a shout out on an episode like I just did and access to bonus content like Q and A episodes where you can submit and vote on questions you'd like me to answer and I'll give my thoughts in roughly twenty minutes. You may also get bonus content like what I recently did by releasing the full interview that I had with Vitalik Buterin a week early before anyone else. Of course, I'll still be making free content like this interview to help spread the message that blockchain doesn't need to be used to further entrench capitalist exploitation if we put our efforts into it, so if that message resonates with you, I hope you'll consider helping out. To continue, maybe just to finish up very quickly, yeah, CZ basically sold, a bunch of FTT tokens, and I think it led to this, like, this idea that everyone I think everyone was already sort of on edge because of all the other different bankruptcies that were happening. But and so people were wondering about the solvency of of FTX and Alameda. And so, eventually, you know, there was all of these, like, crazy tweets from SBS saying, like, don't worry. Everything is fine. We have more than enough to cover withdrawals, which is always the thing that every CEO says, right before their company goes bankrupt, I think. And so now, he well, at that point, he had, like, asked Binance to, to to give them, or for Binance, I think, to to buy them. But that didn't go through. Binance said that the poll was too big, even though they had they had first said that they they might do it. And so now we've we're at a point where he had to declare bankruptcy and he's been sort of he was sort of holed up in his penthouse in The Bahamas for a little bit where he was continuously having other very strange tweets, including the what happened tweet where he tweeted one letter at a time in, like, various different things and then just a weird kind of, like, rambling of what he's trying to do. And now he's been recently going on these different interviews, and everyone's kind of wondering, like, why the hell isn't this guy in jail? Why isn't this guy why hasn't he been arrested yet? And, you know, it feeds very well into this, sort of conspiracy theory that people have been proposing that largely comes from, like, a pretty right wing, view most of the time that, you know, he has sort of been in this kind of cabal of of different, elites with Gary, you know, in cahoots with Gary Gendler and, like, these various other actors that are at the top of the Democratic Party. You know? He also had, you know, Bill Clinton and Tony Blair at, like, this big FTX, conference before. So there's a lot of different, like, little little tidbits about him that when you when you, like, search into it, it's like it it it, like, it's easy to kind of, like, continue going towards that that conspiratorial path. But I think a more reasonable thing to sort of get from all this is that he was just playing the game in a way that was, like, to his own benefit. It wasn't like, I don't you know, he used clearly the effective altruism thing to sort of justify a lot of the things in order to, like, give legitimacy to FTX. He was definitely, like, you know, saying all the right things that he could say in order to get the right type of press and the right type of, treatment, from from different regulatory authorities.
Yeah. I think it I think it's like, I think that the story to me definitely feels like a society and a point in time where there is, you know, there seems to be a lack of regulation around centralized crypto custodians that obviously needs to be fixed immediately. And I think that is something that I think a lot of the crypto kinda industry is is on board with. And the I think that it sort of becomes a bit of like, the industry is is is trying to kinda make a distinction between decentralized and and centralized, and and DeFi and CeFi. And I think that, there definitely is a a a sense in which, without, you know with with with some regulatory clarity in The United States, some of what happened over the last year may not have happened. There's there's reasons, you know, you know, why FTX went, overseas and was able to kind of both create this contraption of FTT and and skirt certain kind of, like, derivatives laws by offering trading offshore, as well as, you know, just kind of like the almost a combination of, like, unclear regulations and then, you know, obviously under regulating, like, you know, where is the kind of glass for crypto. But, yeah, I think it's it's it's very clear that that that it is like a, you know, to me, a a system failure, like a product of the system, like, as it currently stands, in ways that maybe also reflect other industries and other types of similar corruption. The sort of personalized conspiracy narrative that that, that often, you know, happens in our you know? And I think the problem you know, sometimes the problem with that is there are real conspiracies in the world, but, oftentimes and most of the time, it's not as exciting as that. Right. Right. Yeah. I think,
yeah. You have, where people say that, antisemitism is the fool or antisemitism is a socialism for the fools or something like that. It's very easy to fall into these kind of weird traps, if you are not more engaged and more educated about these things. And you know, I think the thing from FTX, I think, you know, there's so many other like as if it is only a crypto thing, which is kind of like also a kind of annoying response that I've seen. It's sort of like, you know, you have of course besides FTX you've had other crypto stuff like non Gox, like BitConnect, like OneCoin. But then you also have, like, you know, you had Enron, you had the Bernie Madoff stuff, you had Lehman Brothers, you've had, Stanford. So a lot of these things, to me, it feels more like an issue of capitalism, of financial capitalism, and sort of, like, the system's inability to, regulate itself in a way that is, like, able to fulfill the the needs of people.
Yeah. Yeah. It sort of just rewards narcissism. And I think what we're seeing here probably is just like a sort of a a a view of narcissism enabled and and kind of at a at a big scale by, you know, a society that that that is, you know, that's what's rewarded.
Yeah. And so I think what it also shows as well is that, like like, The US doesn't have two different parties in in reality in a lot of ways. If you look at kind of what's what how he was playing the system in in which he's been very open and very honest about, is that, like, both Democrats and Republicans have been, like, have have been on on the side of FTX in in different ways, due to probably a lot of the donations that they've that they've received. And so, like, both of these parties are the party of capital. Like, I think Sam Bankman Fried is just kind of like the the weird, awkward, like, sociopathic, but earnest embodiment of capital in a way that just, like, extremely weird, but is just what is the the part of the very literalness of our times, I think, that we live in. Absolutely. And so with all of this kind of happening, you know, I guess for you, I'm curious, like, what what what are the what are the next steps? What what should happen next? Because I can see a lot of people thinking about or talking about that, you know, with all this contagion, you know, it sort of proves a lot of the critics correct that crypto is all sort of just like this, speculative casino, that it's all going to, like it's only going to hurt people and therefore, you know, it should be ignored or it should be made illegal or or banned or whatever. But I think if you want to talk a little bit about, and you talked about a little bit before, but, like, kind of like the the distinction between what FTX is doing and maybe what DeFi is and what it's the the pros and cons of that. Yeah. I think so the fact that that FTX was kind of a custodian,
a centralized entity that had all this control, In a lot of ways, it's like how it alienated itself from a lot of the the crypto community. And, the crypto community, in a lot of ways, has a deep skepticism of custody, although they have a weird, like, love hate relationship with it because we do see a lot of, like, the most hardcore self custody Bitcoiners getting wrecked on FTX or getting wrecked on, what's the I I I can't remember the the most recent one. BlockFi. BlockFi. You know, so the the the centralized exchange has, up until this point in crypto, been kind of like a necessary evil to most of the people in the industry. Coinbase, for example, has has spent a lot of time also trying to kind of straddle the line by, for example, investing in a noncustodial wallet of its own, Coinbase wallet contributing to the development of the Ethereum, ecosystem and, key parts of upgrading and scaling the network. So the the sort of debate and the spectrum of kind of centralized exchanges to decentralized applications and and and alternatives is kind of like a core, existing fault line or existing kind of live wire in in crypto. And, like, there's a spectrum of opinions about how centralized you know, you know, moderately centralized versus fully centralized versus, you know, different levels of centralization and decentralization. But I think in addition to kind of crypto skeptics overall having a lot of ammo to their arguments, in the wake of FTX, I think we're gonna see, you know, the self custody narrative from critics of decentralized entities, also getting a lot of evidence. You can see lots of downloads of noncustodial wallets and purchases spiking of hardware wallets. So I think there's definitely going to be a a refocusing in the crypto community on more decentralized, versions of these things. Vitalik, for example, described a system in which a Ethereum roll up, which is basically an extension of Ethereum, could be used to implement an almost centralized exchange type experience, but in a way that the they could never steal client funds. And these are the types of, you know, things that I I see the kind of crypto community pushing. On the outside, I think it's kinda harder to predict what the the the true impact of this is gonna be. I think there's a lot of issues in passing legislation. There was the bill that, Sam was, apparently pushing. I forget the exact name of it, but is being bandied about in congress. And the main point the dough community, was most pissed at him about was the the portion around regulating DeFi front end. So these decentralized lending protocols or decentralized exchange applications, they exist permanently on the Ethereum blockchain, but you still need to access them through, you know, a web browser, for example, and a an application. And those front end applications, regulating those, the same as as custodians and putting up kind of, like, almost like a a regulatory barrier to a a decentralized competitor to a centralized exchange was kind of a slight of hand that that I think we can safely say SEM was trying to kind of, you know, like, the crypto community kinda caught him out in the middle of, like, trying to do this behind closed doors. And that part of that quote, unquote conspiracy, I think, is is true. Like, he's looking for you know, it's it's but it's not like this grand thing. It's regulatory capture. He wants to just make it harder for, different decentralized exchanges to to compete with a centralized exchange like, like FDF. So I think that one of the big questions is gonna be whether, we see kind of like the the DeFi regulation that includes essentially, like, glomming together centralized exchanges, for example, and decentralized, applications under the same regulatory scheme or or whether crypto community with all of its burned political capital is able to kind of convince the Hill to thread that needle of of cracking down on the centralized lenders and entities, but leaving things like, front ends for for for DeFi applications or decentralized exchanges, relatively untouched except for, you know, probably things like OFAC sanctions and and and and those types of things.
Yeah. Yeah. I think it it has been, interesting to see this type of thing develop. I think yeah. In some ways so you had this, just I mean, the the story is even crazier if you think about it. What was happening just like the month before with SBF? Like, he had for example, he was on a debate with Eric Voorhees on Bankless, kinda like a bit before all this stuff was happening, where they were arguing about the legislation that he was proposing. And I think to a lot of people, SBF just looked like he was completely unprepared for that for that debate and that discussion. And I don't want to like, I disagree heavily with a lot of things that Eric Voorhees says, but he did he did appear, much more prepared in that discussion. But he also said in, I think, a later in a later interview, about how DeFi systematically prevents a lot of, like, basically everything that happened with FTX. I kind of like I don't necessarily agree completely that it prevents everything, but it does prevent some things probably, which is kinda true. That which is, like, I think just shows the just as a way to show the difference between using a decentralized application on decentralized infrastructure versus a centralized choke point on decentralized infrastructure?
Yeah. I think that probably a good outcome for the industry and society is a combination of, like, a, you know, a shift to decentralized and not just decentralized, but, like, provable. So, Vitalik, in that same blog post talked about, various cryptographic proof of reserve systems and and potentially even proof of liability systems where the solvency of kind of the, you know, the centralized financial system even can be sort of, like, provable in some ways. There there are a lot of issues with that, and and it's it is a quite a a big undertaking. So that's kind of one area where where where this could, you know, potentially improve. Another is obviously regulation of like, if you are custodying, you know, customer funds, like, and and I think there probably are, you know, fraud, laws that that already cover what happened with FTX, and I'm pretty confident, like, they're gonna be able to prosecute those. But, nevertheless, there there may be more proactive consumer protection laws. Like, if you're cons you know, costing funds, there there's gonna be, I think, heavier regulation there and there should be. And then, yeah, I think the the sort of the shift to DeFi, some of these scaling technologies that we alluded to making these decentralized or trustless, versions of these exchanges, where it can trade or as fast, or as cheaply as a as as an FTX, but in a in a way that that can't be rugged, so to speak. I think that's also gonna the proliferate is not a a silver bullet. It also doesn't, solve problems like pump and dump schemes and, you know, the kind of influencer network of pay for promotion and, you know, smart contract bugs. And and risk is always, you know, involved in a lot of these undertakings. So, you know, as always, nothing is perfect. But we may, you know, hopefully, for the industry, that, like, over the long run, like, if you're, you know, someone who is a believer in crypto, believer in in this stuff, or think it at least could be something that, you know, is maybe more net good than than not, that this is probably as much as as much as people have, like, completely gotten hurt by this and, you know, it's probably gonna help the industry, like, you know, get out of its sort of, it's sort of, like, immature phase, or it will just kind of collapse, which I think is the the the ultimate, fate for crypto if if it doesn't start focusing much more on non speculative, nonfinancial even use cases, that actually kind of, like, you know, are useful.
So from there, I really want to talk a bit about this publication that you, or this article that you published on your mirror. So I think you're so if I could, I wanna give a quote just from, like, the first paragraph. I thought it was it was pretty good. So the the Mirror blog article for people, if they want to look it up, is called Superstructure. But you said in the first paragraph, the speculative use cases had already completely run out of steam in terms of bringing in some quasi normies on the margins even before SBF Leeroy Jenkins ed the crypto space. There are basically no newbies coming into crypto and most of the ones who had gotten in during this last cycle are sitting crypto out completely now because they've lost so much money. This current blow up is certain to complicate the regulatory and public relations picture for crypto, but I submit that crypto was already facing a do or die proposition, create value outside of speculation for the general public and economy, or likely shrink or collapse over the medium, term as there is less and less to potentially even speculate on. So I think what is interesting, what is happening, like, right now, I think it's sort of like a lot of people realizing that. It's something that I think, I mean, I've been saying for for quite a bit of time. But, yeah, I mean, there needs to be a non speculative reason for people to use cryptocurrency if if people want it to continue to exist. But, yeah, do you want to maybe talk a little bit about that and what what your thoughts are on some of the things that that should be done right now? Yeah. I mean, I think it's it it was already kind of dead. Like, what is dead may never die almost. Like, when when this happened, I think a lot of people
in the industry were like, you know, this was almost like the the seventh or eighth, like, existential crisis that has befallen crypto over the last year. And as the industry has, like, essentially stopped growing, in in terms of, you know, new people coming in to to gamble. I think it is dawning on a lot of people in the space that, hey. You know, like, this space has actually been around for, you know, a while. New technologies do take much longer than people think to actually be diffused and built out. And, like, you know, the the the the impact of the Internet really on society did not happen until, I don't know, twenty years after it kinda, like, first was even commercialized. So, these things do take time. But I think in general, crypto has been given a lot of time by society and does run the risk of this sort of, like, cost benefit thing being irreparably, you know, imbalanced in the public's eye by, you know, all of the kind of excesses and all of the kind of, you know, speculative froth and that that this technology kind of uniquely enables. So it's almost like speculation squared. Everything in technology like railroads, etcetera, you know, was characterized by these speculative bubbles and manias. But there was this, like, self referential loop of that because these things were themselves financialized that, has really, I think, like, you know, sucked up a lot of attention and brainpower in the space towards more speculative and more, you know, reinventing different ways to to trade and reinventing different, you know, types of, complicated financial instruments to kind of speculate and gamble on. And so I think that, ultimately, that had already sort of petered out with the market crash, and that sort of use case will always be there for crypto, I think. But my point was almost that unless the real sort of crypto economy, if you will, you know, in a similar way that, like, you could not have a an only financialized economy. You know, UK is figuring that out, for example, with its relationship to the city of London. So, I think a very similar thing applies to crypto, which is, like, if crypto is not, expanding you know, we have all this secure block space, so to speak, now. And, you know, and I I basically think that the crypto industry's technical challenges are, for the most part, engineering and not research, and they're kind of, you know, just, like, finishing implementing a lot of things like roll ups and data sharding and, data availability sampling and and and thing and lots of, you know, interesting cryptography that that basically removes all the excuses for adoption, at the end of the day. Like, this is gonna be easy to use. This is gonna be super fast and cheap and secure, and we're gonna have all the kind of cakes and eating them too. But what is it all for, I think, is the real fundamental crisis facing crypto. That was already the crisis facing crypto before FTX, you know, in this kind of, like, downturn. And, you know, I don't really see how that does anything other than perhaps accelerate that, realization by the industry and, you know, kinda rip the Band Aid off to some extent. But, yeah, I think that the industry's gonna live or die whether, you know, based on things like, are there viable decentralized marketplaces and applications and social networking sites and, uses for this, new, net new things unlocked for financial applications, you know, for for services that were maybe once, mostly for rich people or for developed market, partly market participants. And so I think a focus on these things is really gonna be the only thing that that is fundamentally growing that GDP of crypto, which, you know, simple simple kind of, like, mental arithmetic says that the GDP of the industry that we're talking about here is is is, like, shrinking or or not growing, then, like, what is the financialized portion even, you know, rehypothecating?
Yeah. There's some there's something to say about the fact that a lot of the like, the finance in crypto world is a purely financial finance, I guess, versus the normal economy where a lot of finance is backed by, like, real goods, real consumer goods. And at the moment, crypto is not really at that point, for the most part, besides kind of more speculative things. In which case, it may be good for the very short term for a team to they may to make a little bit of money to maybe fund their project, but it's not, like, a long term solution at all. Yeah. I I think that, I think that some of those
those, like, real economy things, like, that will I think the the the tech is there. Like, it's possible to do these these things, and and, really, we're we're gonna see whether things like decentralization, censorship resistance, composability, if, you know, if these things are actually, like, enabling new things to happen or not, enabling things that maybe required trusted relationships before or unlocking, you know, inefficiencies, or allowing new types of coordination not possible, you know, without these technologies. And I think that, really, that's gonna be the that's gonna be the the the judge of it is is is whether this is really uniquely suited for it. And, you know, when when all the kind of spectacle of the froth drains out of something like that, you know, it kind of does focus the mind, you know, of an industry like this to to come up with some of those things. So I I do think that we're gonna see some of those green shoots,
actually start to bear fruit, you know, the next few years. Yeah. It's interesting that like, when I when I spoke to Vitalik in my interview, you know, I confirmed with him, like, the the kind of a kind of a big reason behind this idea about soulbound tokens, whether or not you, you know, like it or or not, that idea. But it came from a place of basically needing to create non non speculative use cases for crypto that are that are useful in particular ways. And so I think, like, there is like, I think a lot of a lot of people at the top, I guess, of crypto world, like, know that. And, you know, at the same time, I'm wondering if those people will be able to pull it off or not. I think that's, you know, of course one question. But one thing that I've sort of and maybe this is like a a horrible kind of analogy to to or, like, completely, not relevant, but I kind of feel that this kind of makes me think of, like, the depression or, like, the great depression or, like, any type. There's, like, this big market crash. Like, generally, afterwards, there is the rise of, I mean, kind of both fascism but also a rise in, like, social democracy. Like, so so social democracy only came out of really, like, after, like, extreme sort of, market distress, I guess. That was whenever, like, these types of very basic, like, labor rights or things like that were kind of, like, really solidified or institutionalized. And I think that crypto kind of needs that moment. It kind of needs its, like, social democratic moments at the very least in order to be able to continue.
I think I think that I def I definitely see, like, one possible way that that could end up happening is you do have, like, it's it's it's kinda back to our discussion around, like, the the ability to act and the ability to take action that that this sort of stuff does give certain people, particularly, engineers and developers and things like that. I think that you will find, like, a lot of people who, you know, have are, like, whatever, like, retired already or, you know, who where money is not an issue and they're these, you know, extremely elite, but also kind of work you know, a lot of them are working on foundations or working on protocols for free or work you know, like, building stuff and deploying it themselves and, kind of very quickly self organizing to do something. And a lot of those times, the things that they decide to build is another way to trade and make money, but not all the time. And and I think that the fact that they can, you know, just kind of go ahead and deploy it and see see if it works and and and the the, you know, the kind of autonomy that it does give a certain few privileged individuals who are maybe you know, some percentage of them are very disillusioned by what happened because, you know, even they are true believers. Maybe they're kind of a libertarian, and they're they're sort of, like, you know, having kind of a reckoning of, you know, maybe we do need some regulation of, like, decentralized entities and, and whatnot. But but also, maybe that kind of inspires, some of those people to be like, you know what? You know, what are we doing here if we're not doing something that is, like, you know, impacting the real world instead of, just kind of repeating the cycle over and over again?
I I mean, what is kind of frustrating for me, I guess, is that libertarians will kind of hyperfocus on SBFs, like, the fact that he was speaking to government officials as, like, a way to back up their ideology, that this is sort of, like clearly, this was the state's fault. Whenever the the truth is that, like, FTX and all these other entities are, like, heavily unregulated. They were not regulated. Like, they were they were in the perfect, like, type of schema that libertarians want. And it created this huge issue, you know. It created this all this amount of contagion, and the contagion is because of, like, sort of like this, like capital kind of like I don't want to say incest, but, like, you know, kind of creating these these different interdependent relationships of capital, I guess, in which, you know, when one fails, it all fails. And, you know, these different backstops in the traditional economy, so to speak, although a lot of it is really shit and it does, like, the bare minimum, But it does the bare minimum because the only thing that it cares about is just upkeeping capitalism itself, like and, you know, there's a chance that all of this, contagion is so bad that it can't even, you know, help crypto continue.
Yeah. Well, one thing I might critique from from, you know, like, from that perspective would be, like, the idea of in Vitalik's post, I'm, like, trying to kind of work out a way to disaggregate, like, particularly the proof of liability side of things. And and and to your point about, like, the, you know, like, this is a function you know, there's many ways to tell the story, but, like, one of them is, like, this is what, like, shell companies and complicated corporate structures and lack of corporate oversight and laws are you know, like, and and but, also, these are, like, just, like, you know, endemic to cap concentrations of capital. This is how capital essentially behaves. It conglomerates. It gets into bed with each other, you know, literally and figuratively, and and makes the It's a polycule of capital. You know, keeping track of everything that's going on, you know, watching kind of Vitalik try to figure it all out. I'm like, well, there's only so much that we're gonna be able to do in this mode of production to kind of, roll back the impact of concentrations of capital and, like, what concentrations of capital do behind closed doors and, you know, that can buy you know, like, entities buying each other and and controlling secretly. Like, that's all, like that's got nothing to do with crypto. That's all just, like, you know, shell companies, and that's how the game is played.
On one side, like, someone may say, well, then that's endemic also to crypto. But I think I think it's more endemic to the way that people think about crypto than necessarily crypto itself because you you still have at least a couple examples like the DAO hack and, like, I don't know if you know much about the the situation that happened on the Juno network like a few months ago. But, like, there are times whenever people overcome the logic of capital, you know, where they where they, like, decide, no. We don't want to follow that logic, and we decide something else. And there are, like, these little moments where that that happens, like with the DAO hack, where they completely reversed kind of what happened out of that that situation,
and same with the with the thing that happened in Juno. So, like, I think there is there is still, like, this possibility of of not falling into that trap. I think there's a great example. Another example of that that I would say is there was a a big debate over MEV. I think you I think you may have done an episode on on Yeah. On MEV maximum extractable value, which is kind of like this this, like, this value captured by various privileged positions within blockchains that, various actors can have. And I think there was a there was a moment where, like, there was a a potential version of the Ethereum client that not only, like, helped, miners at that time extract MEB, kind of simple MEB or, like, single block MEB, but also, there was kind of, like, this multiblock MEB or or kind of reorg attack, where the the chain's integrity and consensus was was, like, fundamentally just gonna be destabilized, which actually would have been, like, very profitable for all the different entities. And it would have kind of created, like, almost like a collapse of like, a tragedy, the commons collapse, of, essentially, like, an unusable network and untrustworthy network that destroyed the value of the tokens that the that the MEV was gonna be denominated in. So there are these moments where the and the industry basically like, the individuals involved kinda, like, we're essentially convinced not to build this thing. That's basically what's stopping, this piece of software to from theoretically existing and and and wrecking the Ethereum consensus. So, I think there's numerous examples, of yeah. Like, the industry is not fully acting or participants are not acting in, you know, necessarily strict self interest. Maybe it's enlightened self interest sometimes. And then oftentimes, I do see even, you know, completely altruistic and, you know, kind of, you know, ideological or or or whatever, initiatives or or things that happen, which, you know, cannot be simply explained by just the logic of capital.
Right. And I think it's, you know, perhaps our job to kind of identify those moments and kind of, like, make those moments happen more. Kind of how I see it. Yeah. Definitely. So we're coming probably around, probably end of the interview. I was wondering if there are any sort of, like, last words that you have for people. I mean, I think to two to two different groups, I guess, like, to the left people listening who are kinda skeptical about this technology. And,
I think the skepticism is definitely warranted. I guess I would just encourage you to take a kind of, you know, like, a materialist approach and actually engage with what is actually going on and also have just have, like, a realistic approach. And, you know, this stuff is actually most likely gonna proliferate, and potentially change a lot of how we do things, but also maybe things are gonna stay the same but will be a little bit different. You know, for example, stocks and bonds being put on chain and and whatnot. So regardless of kind of the ideological questions and malleability of it, I think it's important to understand it, and not kind of put, you know, heads in sand and and and whatever. And just keep an open mind to, you know, again, with all the kind of caveats and cynicism to potentially things that could be done with it or impacts that it could have. And then I guess to crypto people, you know, I I would say, yeah, the the there is definitely, like, a need to look at what's happened over the last year kind of without an ideological lens and just kinda try to take a bit of an objective view on what happened. And and, you know, you may have conclusions that are uncomfortable, like, you know, hey. Wait a minute. Like, maybe the state should regulate certain types of intermediated and, you know, custodial, transactions and and commercial relationships and protect consumers. And, you know, like, there may be need for, you know, certain things that are ideologically, you know, not aligned with, let's say, a libertarian philosophy, but which, let's say, preserve decentralization and, certain rights of kind of code as, you know, code as speech and and and ability for kind of sovereign people to to sort of self organize and, you know, do what they wanna do online. I think that that's, yeah, something that I think is important. I think it's something that, that, you know, is gonna have to be let's just be realistic and be, I guess, objective about about what happened in self critical, as an industry. Otherwise, if we're just gonna look at it as like a a conspiracy of the Democrats or a conspiracy of Sam Bankman Fried or whatever, conspiracy of, Gary Gensler, that's a surefire way for this industry to basically, like, not find its way out of this crisis of confidence. And and and so I think,
yeah, just, like, take it seriously and take it, take it to heart. Thanks so much for coming on and for, talking about this with me. Maybe just the last thing, if you want to
leave people your plugs, where can people follow you? And yeah. Yeah. Thanks, man. You can follow me on Twitter at, at Beige forty two. And, yeah. That's,
been great. Thanks. Cool. Yeah. And check out his, blog on Mirror. It's called Superstructure. I think, yeah, I think that's linked on your, on your Twitter profile as well, but I'll put a link in the description.