Crypto exchanges want to prove that the market can thrive after the FTX collapse.
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Binance has a plan to save crypto—if it’s not too late
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I’m not a “cryptobro” nor trying to defend them, but I imagine they would use the exchange for whatever they want to exchange and then remove their “funds” to their own wallet(s). They then are only exposed to any “risk” from the exchange until they withdraw funds to their self custodial “wallet”
Alternatively, if they are Uber bro-y they might seek out a decentralized exchange. Which is mainly a trading matchmaker and does not hold individuals’ funds.
The analogous comparison might be eBay versus Craigslist. eBay actually facilitates exchange of funds while Craigslist is merely a matchmaker and funds are moved directly between involved parties.
Hope that is helpful.
Ps- I realize you are trying to be funny but in reality, I would guess there are very few “crypto bros” who do not have any “fiat” bank and/or brokerage account.
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Holy, fucking shit. Your potato-vodka. I don't think that's been distilled from potatoes, mate. From leftover 'MR-UR-100 Sotka' fuel, perhaps. Potaoes? Definitely not.
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Before the FTX implosion, I wouldn't touch crypto with a ten-foot pole.
Reevaluation: I'm getting a longer pole. Won't get it near crypto.
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Until crypto is a) a genuine medium of exchange rather than a speculative asset and b) shown to have some large beneficial use, not just a means to launder money, we don't need it and shouldn't allow it.
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Fancy Internet Person
Ars Praefectus
In most cryptocurrency schemes, there's no financial activity other than investors buying in and cashing out.
There's literally no way for the thing to make money.
If I invest in a mine or a retail store, there is a way for the mine or retail store to generate a profit and pay off my investment (with interest).
Crypto crap is all about inventing new take money tokens and hoping nobody looks at any of the details.
Maybe exchange fees are a small way to make a profit from facilitating illegal activity, but I would be surprised if the return on that is even OK.
There's literally no way for the thing to make money.
If I invest in a mine or a retail store, there is a way for the mine or retail store to generate a profit and pay off my investment (with interest).
Crypto crap is all about inventing new take money tokens and hoping nobody looks at any of the details.
Maybe exchange fees are a small way to make a profit from facilitating illegal activity, but I would be surprised if the return on that is even OK.
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Not sure I understand the difference between a centralized exchange and a decentralized one? Do you mean wallet services like the Coinbase Wallet?
"Use your own wallet" is an apologist talking point - the issues there are that you assume 100% responsibility for liability and have the technical ability to implement, maintain and secure (go MeeMaw!). Also at some point you will want to cash out and will either have to find an honest participant OR an honest exchange with an assortment of potentially varying fees. It does help protect against exchange failure though.
"Still in it's infancy" is another talking point and few people realize that now a decade or so later no longer true.
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First sentence from that Wiki entry:
"A Ponzi scheme (/ˈpɒnzi/, Italian: [ˈpontsi]) is a form of fraud that lures investors and pays profits to earlier investors with funds from more recent investors.[1]"
Where do you think the money comes from when the price of the Ponzi/Pyramid coins are going up?
It's a pure, 100% Greater Fool scam.
The real difference between a traditional Ponzi scheme is that everyone should know better with crypto coins. Everyone should know the intrinsic value is ZERO. But Greed keeps the incoming supply of greater fools running. While Early entry crypto bros are sitting pretty at the top of the pyramid with billions "worth" of coins...
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Fancy Internet Person
Ars Praefectus
Decentralized exchanges are implemented in smart contract things that are fairly regularly exploited or exploitable.
A fundamental issue remains that cryptocurrency-to-cryotocurrency exchange operations are not really valuable.
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Crypto is crashing and busting...but unlike the dotcom bubble or the sub-prime mortage crisis it's connection to real world economics is much thinner.
A bunch of idiots conjured money out of thin-air but, somewhat sensibly, most people looked at them and said "Nope, we're not accepting that as legal tender".
So, happily for us, the people getting burnt are the primarily hucksters.
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Not to mention - a "recovery" fund. I mean, maybe we could call it a "deposit insurance" func, and then spin off a separate corp so it stays neutral - the Crypto Deposit Insurance Company, or CDIC.
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I'm not sure it's really valid to describe git as a Blockchain. It's more like a linked list.
Describing Git as a blockchain makes me distrust your motives.
In fact, I would say that describing it as such is extremely disingenuous. Either you don't really understand Git or you are intentionally misrepresenting it to try and claim that pretty much anything that is distributed and ordered is a blockchain which is....extremely falacious.
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This. All the stans for "but blockchain..." either have no real-world database experience, no tech understanding, or are like "other than that, how was the play, Mrs. Lincoln"..
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PokemonPets
Ars Scholae Palatinae
Crypto markets are the ponzi runners. Bitcoin is merely a tool
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It's appalling not to hear rational arguments in favor of crypto. It does not require a tectonic shift in thinking just good reasons and a provably better (more efficient/faster/more secure & safe) way of doing things. This has not yet been demonstrated in the 13 years of Bitcoin & Blockchain.
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Talks of forming liquidity pools to "prop up" projects does not in any way add credibility to crypto. No one with a brain and any kind of idea about what to do with assets would say, hey, I know, I'm going to set aside a meaningful amount of value and have it sitting there just in case someone else craps in the pool...unless you didn't believe in your own assets having value and are vitally dependent on these "projects" pumping and inflating the value of what you hold to make it worth something in the first place.
In my mind, the most positive spin would be that that forming "public" liquidity pools is taking practices that are shady at the least or potentially in violation of one or more country's finance regulations and saying, here, instead of playing duck duck goose with the crypto we pass back and forth in secret to make our balance sheets look viable, we'll just put it out in the open! That'll all make it super legit! Whew, we dodged that criminal investigation, look we are so much smarter than FTX!
In my mind, the most positive spin would be that that forming "public" liquidity pools is taking practices that are shady at the least or potentially in violation of one or more country's finance regulations and saying, here, instead of playing duck duck goose with the crypto we pass back and forth in secret to make our balance sheets look viable, we'll just put it out in the open! That'll all make it super legit! Whew, we dodged that criminal investigation, look we are so much smarter than FTX!
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Plus, even if Blockchain has reasonable applications, that still doesn't mean that crypto-coins have intrinsic value.
That seems to be the primary way that hucksters scam people into believing the crypto-coins have intrinsic value when they don't. They handwave about block-chain technology usefulness.
I could write a block-chain application to track inventory, and product delivery, and I wouldn't have to pay a single penny to any crypto coin holder, provider, etc... Not one fucking penny.
Coins using block chain to track them, doesn't give them any kind of monopoly over block chain technology, nor does it give them any intrinsic value.
The only value these coins have is based on a Greater Fools, house of cards, that could easily crash to zero.
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Such a false equivalence. Even if a crypto site is "legit" - what does that mean? They are HONEST about scamming you with a ponzi scheme? I mean, with Poker, you know you might win OR lose. It's a given - not everyone can win. With crypto, EVERYONE loses except for the "founders" and their friends.
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Lifetimes of financial greedy shenanigans and huge collapses are what caused financial regulations to develop over time. If there are problems then the law needs to be changed. Adopting a system of financial anarchy is not going to make things better, it'll only regress us to a time of even more exploitation. Don't fall for the 239th Rule of Acquisition.
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You're just realizing this NOW? ALL of crypto is a Ponzi. Period.
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Ah okay thanks for that! I think I get it..
On the plus side C to C operations are useful in potentially generating fees (and possibly other things!) for the original founders of said crypto..
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"Others, however, have sensed opportunity in the crisis ..."
It's like when scammer A is done with you, he tells his partner, scammer B. You then get a call from scammer B who says "Hey, I understand you recently got scammed. I'm here to help".
It's like when scammer A is done with you, he tells his partner, scammer B. You then get a call from scammer B who says "Hey, I understand you recently got scammed. I'm here to help".
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"So, until the end of Earth"
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“Oh yes,” said Arthur, “and how far’s that?”
“About twelve minutes away,” said Ford, “come on, I need a drink.”
----
“Oh yes,” said Arthur, “and how far’s that?”
“About twelve minutes away,” said Ford, “come on, I need a drink.”
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From my understanding
Centralized Exchange (CEX) = a legal entity that is usually 1 layer away from traditional finance. They exists to facilitate trading between cryptos and USD. That last part is the important part, as they are the only part of the crypto ecosystem that easily allows for the onboarding and off boarding of USD funds. This is because they have some licenses and thus access to banks/bank like entities/entities that have access to banks.
Decentralized Exchanges (DEX) = entities that do not have access to traditional finance thus they are limited by not allowing transactions involving USD. They exist as a place for traders to swap tokens/coins. This is facilitated by 3rd parties offering a liquidity pool(s) for the desired trading pairs. To incentivize 3rd parties, the DEX will periodically pay them based on the usage rate of their supplied trading pair. DEXs also make money based on trading volume and fees charged.
Yield providers = are entities that users trade their tokens for an IOU + a return based yield rate %. Usually, the terms are written as such that the user gives/sells their tokens to the Yield provider for an IOU. The Yield provider then “locks” these IOUs making them non-redeemable for a specified time period. During this time period they sell or loan these assets to other entities who are going to invest those funds. Long story short, User gives X token to Yield provider because the yeild provider proces 15% annualized returns. The Yield provider loans the X tokens to risky VC/investor Z under the terms that they will be able to make a return of 16%.
Crypto VC/hedge funds = are entities that take on risky investments like their traditional finance counterparts. They usually are powered by a mix of debt and equity financing. Some famous ones include: 3AC, Sequoia, a16z.
Stablecoins providers = providers that offer a coin/token that is pegged to the USD. On paper they are supposed to have cash or cash equalivents (such as commercial paper grade A2 or better) that they can quickly liquidate to meet market demands. Fractional reserving or conjuring magic pegged coins are ”supposed” to be illegal. They are most similar to the traditional finance concept of “shadow banks.” They provide liquidity to the markets and a token that is generally safe from market volatility due to its pegged nature. Some famous ones include: UST, USDT, USDC, USDD.
Long story short, you are correct. In the ideal crypto universe, users are supposed to give up the luxuries of fiat to pursue the beauties of decenterlized finance. Meaning that they take on the full burden of reviewing the code they interact with, securing their own physical safety and if they ever mess up then they just need to “get good.” In this world, CEXs wouldn’t need to exits as there should be no reason to go back to fiat.
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I would rather Ars didn’t run uncritical articles like this. I did notice the Wired byline so it was easy to avoid reading it, but still.
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For the record, in real life, scammers go after the victims of other scams like sharks go after bleeding prey. Victims of scams have demonstrably proven they're susceptible to the scam, and therefore are fresh meat to be persuaded because the argument "We're not a scammer like those other guys were, we're legit!" actually works on them most of the time.
It's been my experience that people generally don't learn from their mistakes the first time, and make them several times before the lessons those mistakes were supposed to teach the FIRST TIME finally sink in. Scammers have noticed the same predilection among those people who were scammed as well.
This is also why religion has a draw, and cults, and politics and other scams that promise things for cash/support/commitment, but pretty much lie about it and never deliver them.
We live in a time when people are far more credulous than they used to be, even if they like to think they're sophisticated and savvy people, but aren't.
Those make for the best scam victims, because they keep coming back to drink from the poisoned well. Proof: The same people keep getting eaten by the Bitcoin scam.
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Well, to give a serious answer...there are kinda a few camps. Some True Libertarian Cryptobros don't trust the exchanges at all; at least these ones are intellectually consistent! They're the ones who are big into "defi" and "cold wallets" and stuff. They're pretty snooty about people who do use exchanges.
Then there's your Acolytes, who kinda believe in all the crypto stuff in a vague way, but really are just hero worshipping someone. They're like Musk fans. For these folks, using Exchange A is fine because xxStoner420xx (the founder of Exchange A) is clearly a unique genius who is going to take everyone to the promised land. Even though fiat and banks in general are Bad, xxStoner420xx is such a unique genius he knows how to take advantage of them to make money, so it's fine!
Then you have the Not True Believers crowd, which includes two important groups: sophisticated institutional investors and very unsophisticated retail investors. Neither of these groups give a shit about crypto ideology; they both just want to make money and bet that crypto is a way to do it. They are fine with using exchanges because it's convenient. The unsophisticated retail investors probably never gave a thought to the risks of this kinda thing happening. The institutional investors either didn't think about it either (because they're often stunningly incompetent!), thought about it but decided it was manageable (they'd be able to cash out before the fall or were actually dumb enough to trust the exchanges), or (for conspiracy fans) were in on it in some way.
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Wait, is there a universe where trading money for magic beans isn't a gamble by definition?
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Here's some advice for new investors. All markets do a thing called 'return to value'. Over time, wealth is only ever a function of value created. If you invest ideas and labor and turn a pile of parts into a finished good that people want or need, you've created value, and wealth can be created. If you move that pile of parts over to a different pile of parts, you haven't created value and wealth can't be created.
Wealth comes from building infrastructure, products, art, services, and so on. Some value needs to be added. Even fucking investment banks can do this by financing the creating of things by people that don't have enough money to create them.
If you look at what took down the financial markets in 2008, it was money being invested in things that didn't create value. At some point those investments get looked and and compared to what was made and get discounted back to what was made - a return to value. That process threw several million people out of work, out of their homes, and ruined their retirement, but sooner or later that return to value was going to happen. You can't prop a system up on constantly collecting money from moving one pile of parts over to another pile of parts.
Crypto is just 2008 all over again. It's purer in form because at least some value was being created in the housing market (nowhere near what investors were reflecting) whereas crypto creates none. Crypto is a mechanism to transfer wealth from one party while destroying it with another party. You can song and dance people enough to get them to throw more cash in there, but it's just a matter of time before it returns to value, and the value is $0. The only way to make money is to bail out before that happens, leaving someone else holding the bag. If you think the world is shitty and unfair, and you're a crypto person, you're part of what is making it shitty and unfair. You can invent a narrative where you're taking it to the central banks and democratizing currency or whatever, but the truth is you're just fleecing a different group of people.
Wealth comes from building infrastructure, products, art, services, and so on. Some value needs to be added. Even fucking investment banks can do this by financing the creating of things by people that don't have enough money to create them.
If you look at what took down the financial markets in 2008, it was money being invested in things that didn't create value. At some point those investments get looked and and compared to what was made and get discounted back to what was made - a return to value. That process threw several million people out of work, out of their homes, and ruined their retirement, but sooner or later that return to value was going to happen. You can't prop a system up on constantly collecting money from moving one pile of parts over to another pile of parts.
Crypto is just 2008 all over again. It's purer in form because at least some value was being created in the housing market (nowhere near what investors were reflecting) whereas crypto creates none. Crypto is a mechanism to transfer wealth from one party while destroying it with another party. You can song and dance people enough to get them to throw more cash in there, but it's just a matter of time before it returns to value, and the value is $0. The only way to make money is to bail out before that happens, leaving someone else holding the bag. If you think the world is shitty and unfair, and you're a crypto person, you're part of what is making it shitty and unfair. You can invent a narrative where you're taking it to the central banks and democratizing currency or whatever, but the truth is you're just fleecing a different group of people.
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What if i told you that a good deal of crypto‘s value was propped up by a few companies doing a lot of financial shenanigans?
What would crypto value’s be if it wasn’t tied to stablescoins that are tied to USD?
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No, the reason it's popular is because people who didn't understand the system got fucked over in 2008 and rather than try and fix the system or educate the public they invented a new system that they understood where they can be the ones fucking people over. That's all it is.
Every crypto collapse is a subset of that group winning the game against a different subset of that group. It will repeat until there is nothing left. If you didn't make money out of FTX, that's because you were the mark. SBF invented a system on top of your system that he understood and you didn't and he fucked you. That's not a tragedy, it's the whole goddamn point of the system. That's it working as designed.
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We live in a time of record wealth inequality. A time of failing social support systems, unaffordable housing, wages unable to keep up with inflation…. There are the few mega rich, and everyone else. Actually about 50% of the population has a net worth approaching zero once debts are accounted for. Nearly half of humanity, that is 4 billion people, live on $5.50 a day or less. Crypto….is nothing more than a get rich quick scheme marketed to the increasingly desperate.
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