February 20, 2023 • 17 mins
It's a holiday in the US, an opportunity to look back on one of our popular episodes. It was recorded with Joe Weisenthal from the Bloomberg Odd Lots podcast shortly after FTX declared bankruptcy and Sam Bankman-Fried was arrested.
We talked to Joe about “the box." Back in April 2022, long before Sam-Bankman Fried was tweeting threads about the collapse of his FTX empire, he joined the Odd Lots podcast and talked about this "box" - his metaphor for describing the crypto practice of “yield farming." SBF's description at the time raised many an eyebrow because it seemed too good to be true. Enjoy!
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Episode Transcript
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Speaker 1 (00:03):
This is Bloomberg Crypto, a daily Bloomberg Ihad podcast, and
I'm Stacy Marie Ishmael, Managing editor of Crypto for Bloomberg News.
It's Monday, February twenty hill, Stacy Marie here today in
(00:24):
the US, it's a holiday, so we thought this would
be a good opportunity to reshare an episode that we
had previously recorded with my colleague from Odd Lots, Joe.
And as an aside, you should definitely be listening to
the Odd Lots podcast. We first recorded this episode in
the immediate aftermath of the collapse of Crypto Exchange f
t X. Joe's comments are insightful and as always quite entertaining.
(00:45):
I hope you enjoy. Have you heard the one about
the box? Well. In April two, long before Sam bankmun
Freed was tweeting rambling threads about the collapse of his
f t X empire, uh, he joined the Bloomberg Odd
Lots podcast and talked about the box. What this protocol is,
(01:06):
It's called protocol Eye. It's a box and you can
can take it token, and you can take a theory
and you can put it in the box and you
can take it out like you put it in the
box and you get like, you know, an I owe
you for for having to put it in box, and
then you can redeem that I owe you back out
for the token. The box was bankman Fred's metaphor for
describing the crypto practice of yield farming, and his description
(01:28):
at the time raised many an eyebrow because it seemed well,
both too blunt and too good to be true. I'm
joined today by Joe Wisenthal, co host of the Odd
Lots podcast, who at that time ended that episode with
a deeply releasable comment, I don't know how to feel
about it. I feel weird. We all feel weird. Joe,
(01:50):
Welcome to the show. Thank you so much for having me. Yeah,
and you know you range from like what's happening with
trucking supply chains to Guyana to interviewing some bankman Freed.
(02:13):
So for the for the purposes of this episode, we're
going to talk about that interview. In April two. This
was right before the Salt conference in the Bahamas. Things
were still um i'll use the word frothy and optimistic.
The vibe was very much, you know, to the moon,
as the bitcoin folks like to say, and bankman. Freed
(02:34):
came on the show, which was co hosted by Tracy
and had a special guest to parents from Matt Levine.
Among many other things you talked about, one of the
things was about Defy and yield farming, and at that point,
you know, he had this metaphor about the box, which
is like you put money in and kind of money
comes out, and what happens in between is mysterious. And
I really listened to that episode before we recorded this one,
(02:56):
and I just remember you, Tracy and Matt all doing
variations on what it's interesting because the box comments, I
think it's about twenty or so minutes into the episode,
and I do think that if you sort of listened
to the full episode, just the tone of it, we
never quite recovered or got back on track after that,
(03:16):
I think because we were all like a little like flabbergasted,
a little bit surprised by the bluntness these sort of
you know, after he described yield farming as like this
sort of magic money box where you put money in
and then money comes out, and Matt's first response was like,
to be honest, that sounds like a Ponzi scheme. And
I was like doesn't really seem like there's any economics
(03:38):
value created at all. My expectation at that moment in
the conversation was that he would push back a little bit,
like he would say something like, oh, well, that's just
sort of like the structure of it, but something cool
and productive could theoretically happen in the box. So what
surprised me at the time was not even the metaphor
per se. But after a sort of said that sounds
(04:01):
like Ponzi, after we all kind of said, oh, where's
the value, there was like no pushback or anything. And
I think that was actually the part, more than anything
else that I found to beat Jarring. And then yeah afterwards,
like you know, but yeah to the end and Tracey
and I are did our outro, and I think we
just sort of like stammered a little bit because after
that moment we didn't really know what to say except wow,
(04:21):
that was in a in a weird way, it seemed
very honest. It seemed like he was being extremely candid
about what he thought cynical. But it you know, it
almost came off as like, well, yeah, here's a crypto
person saying what many people outside of crypto believed to
be the case about the industry. You, like many other people,
have read the Vox story in which which was essentially
(04:43):
like he was texting with a Fox Reports, and there
was so much in there in which he indicated just
how savvy he was about his public persona and the
kinds of things that he had to say in order
to seem credible. But you also got the impression that
this is a person who, while he was doing that,
(05:03):
while he was playing this part to some extent, believed
that he was above the free right that he was
to use a very old phrase and finance actually still
the smartest guy in the room. Well, you know, one
thing that I long thought about Sam and being separate,
and so I don't know if above is right, but
you know, maybe he did think of himself but definitely separate,
(05:24):
which is that you know, in his public persona leg
on Twitter, etcetera. He never really made the case that
crypto is good. Most people in the space argue that, oh, yeah,
of course, you know, they don't really talk about all
the money they're making or they were making anyway. They
talked about, Oh, we're changing the world, and we're gonna
bring transparency and trustlessness and you're not gonna have your
(05:48):
money do valued by the FED, and you're not gonna
have to trust JP Morgan, etcetera, or the sort of
other version that it's like, oh, well, people in emerging
markets without access to reliable payments, there stable, whatever it is.
They're all these stories that crypto people tell the public,
and I think, to a large extent, tell themselves to
put this gloss on making a lot of money so
(06:10):
that sounds like important in world changing. And he never
did that, as far as I could tell. It was
always about the money, not just in that conversation but elsewhere,
and so I always thought, you know, I remember, like
even a friend of mine several months ago asked me
what I thought of um SPF. I thought it was
sort of refreshing that he didn't sort of like position
(06:31):
making a lot of money and crypto is sort of
this noble thing. And basically he was like he and
the various Lamenta people who are on Twitter or like,
they really just talked about the money. And they talked
about the money. Obviously there was this backdrop, whether you
believe that it was sincere or not of you know,
what's called effective altruism. But the idea is like you
(06:51):
make a bunch of money and eventually maybe you change
the world. But it was also the way that they
talked about the money was very matter of facts, and
I think in addition to what you're identifying about the
the self righteousness that can infuse crypto Twitter, sometimes there's
also a lot of mud slinging. Right there's as is
happening right now, various similarly disgraced crypto founders of spending
(07:17):
quite a lot of time on Twitter redirecting attention towards
you know, Sam Bankman, Freed and ft X right now.
There were a couple of times I remember, you know
when bank when Freed talked about like coin based earnings
and various other things, but for the majority of his
presence he was talking up or talking about like his
own entities. And there were many when you were interviewing
(07:40):
other folks in the crypto space, and you've talked to
a lot of them, what was their perception of what
was happening at Alameda, ft X, Bankman Freed himself. That's
a good question. So I don't think in any of
our interviews that we've actually done on the podcast that
we actually like talked about f t X and later
or SBF. What I do know is that, you know,
(08:01):
when I spoke to traders just sort of independently or
my curiosity about the industry, they really like trading on
f t X, and I think this is like it
from my perspective again, you know, sort of going back
and like rethinking things. Like one of the through lines
was that professional like crypto hedge fund traders, etcetera, thought
(08:21):
it was a really high quality product for a number
of reasons, that there was a high level of customer support,
that there was a high level of up time. If
you recall, sites like coin base have had some pretty
big down times from time to time, it didn't seem
like f t X had any I remember talking to
a trader who once told me that, like, basically you
can buy with a tremendous amount of leverage, so it's
(08:43):
like ft X and binance, etcetera. And then if the
position moves against you get the position liquid and your
collateral gets taken away from you. But of course, any
algorithm that determines with when your collateral is gonna get
taken away from you, you know, it's gotta it's based
on some sort of like you know, probabilistic measure. I
don't really know the math, but some sort of probabilistic
measure of your in risk of losing the exchange money.
(09:06):
And what I was told by one trader is like
that f t x is liquidation engine works so well,
and they're like, oh, ft X is going to take
over the world because their liquidation engine is so much
better than everyone else's that they've trade with. There was
also cross margining abilities, so you could post one type
of token is a collateral and get leverage against the
different asset you apparently could not get on binance. So
I think there was another aspect in which, you know,
(09:29):
you sort of like if you were to think about
from an investor perspective, like doing due diligence on a company.
We want to talk to to the customers like the product,
and my impression always was that customers really like trading
on ft X. You have this combination of software that
seemed to be pretty decent, right and insofar as the
value that the ft X trading platform is providing to
(09:50):
institutional investors, a lot of intelligence, a lot of people
who were all about the money, and yet the size
of the losses that whether it's between eight or ten
billion dollars, seems to have stunned a lot of people
just in terms of the share scoope of it. Yeah,
and I do believe that, like where the money went
is still a mystery, but what seems like very plausible
(10:13):
is that Alameda was lost a lot of money trading.
I mean, on some level or another, that seems to
be the case. And you know, this is something that,
like I said, I never really heard people talk that
much about Alameda. But you know, of course um Sam
had a background at the famous quant trading shop Jane Street,
(10:34):
as did some of his colleagues, and so the presentation
of Alameda was that it was sort of like this
market neutral quantitative trading shop. And I'm pretty sure on
the Alameda website they also talked about that they were
a market neutral firm. So not taking big directional that
one way or another. But that being said, and you know,
(10:56):
if you're like thinking, okay, like let's go back and
think more about and flags, I do recall, you know,
and people have since pointed these out, but I do
remember thinking at the time that the former CEO of Alameda,
San Trabuco, who left the company earlier in the year.
At some point this summer he did hit these threads
that did not seem like very quanty, did not seem
(11:19):
like market neutral. And one of the threads that people
point to, if I recall it like basically like, oh,
we went long doorge coin ahead of elon Esnel, which maybe,
you know, maybe a fine trade, although I think that
was the peak. But it's like, oh man, this is
not exactly what I thought. What my impression of what
Alameda was doing, And I thought what he was doing was,
(11:39):
you know, making markets and collecting spreads between the price
of a coin on one side and the price of
a coin on another side, or the price of a
coin on a centralized exchange versus the price on the
DeFi exchange. So I did, you know, I didn't think
too much about it, but I did think, I guess
I that it did seem different what I than what
I thought Alameda was doing. We'll be right back with
(12:01):
more from Bloomberg's Joe, wisn't all you said? The friends
of the show, Katie and Tim that one of the
signs that crypto is immature is that it's too hard
to launder money. Yeah, well, without getting caught. Well, this
(12:25):
is like so something I mean, I've been you know,
from day one. It's like, this is the question. It's like, well,
what is crypto good for? Right? We've probably both of
us have asked this question a million guess like, Okay,
it's fun as journalists we like looking at the lines
going up and down, and it's probably fun is traders look,
you know, big big swink, But like, what is it
good for? Right? What is the point of any of this?
(12:47):
And you know, one of the things you hear, particularly
from the bitcoins side of the world, just like, well,
it's good for censorship resistant payments, doing the payments that
the state doesn't want you to do, doing the payments
that would Venmo or PayPal or zel or your bank
would kick you off for right, trustless money. And yet
it doesn't seem to be that good for that either
as far as I can tell. And so, like, you know,
(13:08):
even the sort of like bare minimum things that like
crypto proponents often say, which is like, well, person a
can a person be money and persons? He can't say no,
I'm not even convinced that it's true, because again, I
think in the you know, the context we were discussing
was like there was a big test of this with
the Canadian trucker protests earlier this year, and a lot
(13:28):
of that money got seized or blocked, and that was
people trying to donate to the protesters. And so, regardless
of what you think about the protesters mission or cause,
it struck me as kind of a test of like
cryptos as particularly bitcoins main claims. And I don't think
I really lived up. They didn't really have a way
of getting bitcoin to the protesters in a way that
was trust list and could avoid blockage. Well, one of
(13:51):
the things that the truckers did is they like put
a bunch of wallet addresses on their signs and the
size of the trucks, and they're like, send us money here,
and then various regularly says well, like we're just gonna
but you know, on the other hand, like there's no
like I think, you know, I remember so after that happened,
I remember seeing these discussions even among many like sort
(14:11):
of bitcoin proromis like oh, they shouldn't have like, uh,
you know, made the wallets address is so public, which fine, maybe,
but I don't think I ever saw like a great
alternative solution, and you know, it's like, Okay, let's say
you are going to be the focal point for disbursing
the money. I'm going to send it to you, and
you know who the truckers are privately, and you're gonna
(14:32):
dispurse it. How do I trust you? How do I
know you're not gonna pocket it? Etcetera. And so even
like if you could find a way like around the
public wallet episodes, like, you still have the problem of
trusting the intermediaries. So it's very tricky. And so I
thought that that was like a pretty good test of
whether you know, like bitcoins core claims and censorship resistance
could be defended, and I thought it was lacking. Is
(14:55):
there anything that you're seeing in the response to the
fallout from algorithmic stable call Three Arrows, Capital Celsius Voyager
SPF f t X that is suggesting what the next
crisis could look like? So I did actually have one
thought on this specific question, which is that one of
the things you're hearing about now in the wake of
f t X is this concept where they say, okay,
(15:16):
crypto entities, particularly centralized ones, if they're going to be centralized,
should produce some sort of proof of reserves. And this
idea that with cryptographic technology you don't necessarily have to
reveal your entire balance sheet or all the items on it,
but you can prove your solvency in some way. And
so you have some snapshot of coins that are yours
and you could prove your solvency. And the first thought
(15:39):
that went to my mind was sure, you might be
able to do that, but how do you know that
the marks are true? And of course in trand FI,
you know, two thousand, two thousand nine, it was always
like level on, level two, level three, Mark Smith, That's right,
And we saw that a bit with f t X
because part of the story is how much of the
ft in seram tokens they had, and I think many
(16:02):
people would say that those coins were marked Smith. You know,
if the next stage of okay, what lessons learned from
f t X, every exchange has to sort of like
have some sort of cryptographic proof of solvency, then I
think the next crisis after that could have something that's like, yeah,
but where did these prices come from and how reliable
are they? Because we do see that of course with
(16:22):
the f t T and serum question with f t X,
and I'm not sure that like a proof of reserves,
had it been in place for f t X, would
have necessarily been robust against that failure. Thank you so
much for coming on the show. Thanks for having me.
You can find more of Joe's work on the Bloomberg
Ceminal and on Bloomberg dot com, and of course on
the Odd Lots podcast, as well as the Odd Lots
(16:43):
News less Of, and be sure to check out our
twice weekly news less of Bloomberg Crypto. This is Bloomberg Crypto,
a daily podcast from Bloomberg and I Heart Radio. For
more shows from I Heart Radio, visit the I Heart
Radio app, Apple Podcasts, or wherever you get your podcasts.
(17:05):
Send us your comments, questions, or suggestions for the show
to Crypto at Bloomberg dot net. The supervising producer of
Bloomberg Crypto is Vicky Verglina. Our senior producer is Janet Babin.
Our producers are Mohammed Faruk and Sharon Barriro. Our associate
producers are Ty Butler and Moses on Them. Desta wonder
(17:26):
At is our engineer. Original music by Leo Sidrin. I'm
Stacy Marie schmal, We'll be back tomorrow.
This is Bloomberg Crypto, a daily Bloomberg Ihad podcast, and
I'm Stacy Marie Ishmael, Managing editor of Crypto for Bloomberg News.
It's Monday, February twenty hill, Stacy Marie here today in
(00:24):
the US, it's a holiday, so we thought this would
be a good opportunity to reshare an episode that we
had previously recorded with my colleague from Odd Lots, Joe.
And as an aside, you should definitely be listening to
the Odd Lots podcast. We first recorded this episode in
the immediate aftermath of the collapse of Crypto Exchange f
t X. Joe's comments are insightful and as always quite entertaining.
(00:45):
I hope you enjoy. Have you heard the one about
the box? Well. In April two, long before Sam bankmun
Freed was tweeting rambling threads about the collapse of his
f t X empire, uh, he joined the Bloomberg Odd
Lots podcast and talked about the box. What this protocol is,
(01:06):
It's called protocol Eye. It's a box and you can
can take it token, and you can take a theory
and you can put it in the box and you
can take it out like you put it in the
box and you get like, you know, an I owe
you for for having to put it in box, and
then you can redeem that I owe you back out
for the token. The box was bankman Fred's metaphor for
describing the crypto practice of yield farming, and his description
(01:28):
at the time raised many an eyebrow because it seemed well,
both too blunt and too good to be true. I'm
joined today by Joe Wisenthal, co host of the Odd
Lots podcast, who at that time ended that episode with
a deeply releasable comment, I don't know how to feel
about it. I feel weird. We all feel weird. Joe,
(01:50):
Welcome to the show. Thank you so much for having me. Yeah,
and you know you range from like what's happening with
trucking supply chains to Guyana to interviewing some bankman Freed.
(02:13):
So for the for the purposes of this episode, we're
going to talk about that interview. In April two. This
was right before the Salt conference in the Bahamas. Things
were still um i'll use the word frothy and optimistic.
The vibe was very much, you know, to the moon,
as the bitcoin folks like to say, and bankman. Freed
(02:34):
came on the show, which was co hosted by Tracy
and had a special guest to parents from Matt Levine.
Among many other things you talked about, one of the
things was about Defy and yield farming, and at that point,
you know, he had this metaphor about the box, which
is like you put money in and kind of money
comes out, and what happens in between is mysterious. And
I really listened to that episode before we recorded this one,
(02:56):
and I just remember you, Tracy and Matt all doing
variations on what it's interesting because the box comments, I
think it's about twenty or so minutes into the episode,
and I do think that if you sort of listened
to the full episode, just the tone of it, we
never quite recovered or got back on track after that,
(03:16):
I think because we were all like a little like flabbergasted,
a little bit surprised by the bluntness these sort of
you know, after he described yield farming as like this
sort of magic money box where you put money in
and then money comes out, and Matt's first response was like,
to be honest, that sounds like a Ponzi scheme. And
I was like doesn't really seem like there's any economics
(03:38):
value created at all. My expectation at that moment in
the conversation was that he would push back a little bit,
like he would say something like, oh, well, that's just
sort of like the structure of it, but something cool
and productive could theoretically happen in the box. So what
surprised me at the time was not even the metaphor
per se. But after a sort of said that sounds
(04:01):
like Ponzi, after we all kind of said, oh, where's
the value, there was like no pushback or anything. And
I think that was actually the part, more than anything
else that I found to beat Jarring. And then yeah afterwards,
like you know, but yeah to the end and Tracey
and I are did our outro, and I think we
just sort of like stammered a little bit because after
that moment we didn't really know what to say except wow,
(04:21):
that was in a in a weird way, it seemed
very honest. It seemed like he was being extremely candid
about what he thought cynical. But it you know, it
almost came off as like, well, yeah, here's a crypto
person saying what many people outside of crypto believed to
be the case about the industry. You, like many other people,
have read the Vox story in which which was essentially
(04:43):
like he was texting with a Fox Reports, and there
was so much in there in which he indicated just
how savvy he was about his public persona and the
kinds of things that he had to say in order
to seem credible. But you also got the impression that
this is a person who, while he was doing that,
(05:03):
while he was playing this part to some extent, believed
that he was above the free right that he was
to use a very old phrase and finance actually still
the smartest guy in the room. Well, you know, one
thing that I long thought about Sam and being separate,
and so I don't know if above is right, but
you know, maybe he did think of himself but definitely separate,
(05:24):
which is that you know, in his public persona leg
on Twitter, etcetera. He never really made the case that
crypto is good. Most people in the space argue that, oh, yeah,
of course, you know, they don't really talk about all
the money they're making or they were making anyway. They
talked about, Oh, we're changing the world, and we're gonna
bring transparency and trustlessness and you're not gonna have your
(05:48):
money do valued by the FED, and you're not gonna
have to trust JP Morgan, etcetera, or the sort of
other version that it's like, oh, well, people in emerging
markets without access to reliable payments, there stable, whatever it is.
They're all these stories that crypto people tell the public,
and I think, to a large extent, tell themselves to
put this gloss on making a lot of money so
(06:10):
that sounds like important in world changing. And he never
did that, as far as I could tell. It was
always about the money, not just in that conversation but elsewhere,
and so I always thought, you know, I remember, like
even a friend of mine several months ago asked me
what I thought of um SPF. I thought it was
sort of refreshing that he didn't sort of like position
(06:31):
making a lot of money and crypto is sort of
this noble thing. And basically he was like he and
the various Lamenta people who are on Twitter or like,
they really just talked about the money. And they talked
about the money. Obviously there was this backdrop, whether you
believe that it was sincere or not of you know,
what's called effective altruism. But the idea is like you
(06:51):
make a bunch of money and eventually maybe you change
the world. But it was also the way that they
talked about the money was very matter of facts, and
I think in addition to what you're identifying about the
the self righteousness that can infuse crypto Twitter, sometimes there's
also a lot of mud slinging. Right there's as is
happening right now, various similarly disgraced crypto founders of spending
(07:17):
quite a lot of time on Twitter redirecting attention towards
you know, Sam Bankman, Freed and ft X right now.
There were a couple of times I remember, you know
when bank when Freed talked about like coin based earnings
and various other things, but for the majority of his
presence he was talking up or talking about like his
own entities. And there were many when you were interviewing
(07:40):
other folks in the crypto space, and you've talked to
a lot of them, what was their perception of what
was happening at Alameda, ft X, Bankman Freed himself. That's
a good question. So I don't think in any of
our interviews that we've actually done on the podcast that
we actually like talked about f t X and later
or SBF. What I do know is that, you know,
(08:01):
when I spoke to traders just sort of independently or
my curiosity about the industry, they really like trading on
f t X, and I think this is like it
from my perspective again, you know, sort of going back
and like rethinking things. Like one of the through lines
was that professional like crypto hedge fund traders, etcetera, thought
(08:21):
it was a really high quality product for a number
of reasons, that there was a high level of customer support,
that there was a high level of up time. If
you recall, sites like coin base have had some pretty
big down times from time to time, it didn't seem
like f t X had any I remember talking to
a trader who once told me that, like, basically you
can buy with a tremendous amount of leverage, so it's
(08:43):
like ft X and binance, etcetera. And then if the
position moves against you get the position liquid and your
collateral gets taken away from you. But of course, any
algorithm that determines with when your collateral is gonna get
taken away from you, you know, it's gotta it's based
on some sort of like you know, probabilistic measure. I
don't really know the math, but some sort of probabilistic
measure of your in risk of losing the exchange money.
(09:06):
And what I was told by one trader is like
that f t x is liquidation engine works so well,
and they're like, oh, ft X is going to take
over the world because their liquidation engine is so much
better than everyone else's that they've trade with. There was
also cross margining abilities, so you could post one type
of token is a collateral and get leverage against the
different asset you apparently could not get on binance. So
I think there was another aspect in which, you know,
(09:29):
you sort of like if you were to think about
from an investor perspective, like doing due diligence on a company.
We want to talk to to the customers like the product,
and my impression always was that customers really like trading
on ft X. You have this combination of software that
seemed to be pretty decent, right and insofar as the
value that the ft X trading platform is providing to
(09:50):
institutional investors, a lot of intelligence, a lot of people
who were all about the money, and yet the size
of the losses that whether it's between eight or ten
billion dollars, seems to have stunned a lot of people
just in terms of the share scoope of it. Yeah,
and I do believe that, like where the money went
is still a mystery, but what seems like very plausible
(10:13):
is that Alameda was lost a lot of money trading.
I mean, on some level or another, that seems to
be the case. And you know, this is something that,
like I said, I never really heard people talk that
much about Alameda. But you know, of course um Sam
had a background at the famous quant trading shop Jane Street,
(10:34):
as did some of his colleagues, and so the presentation
of Alameda was that it was sort of like this
market neutral quantitative trading shop. And I'm pretty sure on
the Alameda website they also talked about that they were
a market neutral firm. So not taking big directional that
one way or another. But that being said, and you know,
(10:56):
if you're like thinking, okay, like let's go back and
think more about and flags, I do recall, you know,
and people have since pointed these out, but I do
remember thinking at the time that the former CEO of Alameda,
San Trabuco, who left the company earlier in the year.
At some point this summer he did hit these threads
that did not seem like very quanty, did not seem
(11:19):
like market neutral. And one of the threads that people
point to, if I recall it like basically like, oh,
we went long doorge coin ahead of elon Esnel, which maybe,
you know, maybe a fine trade, although I think that
was the peak. But it's like, oh man, this is
not exactly what I thought. What my impression of what
Alameda was doing, And I thought what he was doing was,
(11:39):
you know, making markets and collecting spreads between the price
of a coin on one side and the price of
a coin on another side, or the price of a
coin on a centralized exchange versus the price on the
DeFi exchange. So I did, you know, I didn't think
too much about it, but I did think, I guess
I that it did seem different what I than what
I thought Alameda was doing. We'll be right back with
(12:01):
more from Bloomberg's Joe, wisn't all you said? The friends
of the show, Katie and Tim that one of the
signs that crypto is immature is that it's too hard
to launder money. Yeah, well, without getting caught. Well, this
(12:25):
is like so something I mean, I've been you know,
from day one. It's like, this is the question. It's like, well,
what is crypto good for? Right? We've probably both of
us have asked this question a million guess like, Okay,
it's fun as journalists we like looking at the lines
going up and down, and it's probably fun is traders look,
you know, big big swink, But like, what is it
good for? Right? What is the point of any of this?
(12:47):
And you know, one of the things you hear, particularly
from the bitcoins side of the world, just like, well,
it's good for censorship resistant payments, doing the payments that
the state doesn't want you to do, doing the payments
that would Venmo or PayPal or zel or your bank
would kick you off for right, trustless money. And yet
it doesn't seem to be that good for that either
as far as I can tell. And so, like, you know,
(13:08):
even the sort of like bare minimum things that like
crypto proponents often say, which is like, well, person a
can a person be money and persons? He can't say no,
I'm not even convinced that it's true, because again, I
think in the you know, the context we were discussing
was like there was a big test of this with
the Canadian trucker protests earlier this year, and a lot
(13:28):
of that money got seized or blocked, and that was
people trying to donate to the protesters. And so, regardless
of what you think about the protesters mission or cause,
it struck me as kind of a test of like
cryptos as particularly bitcoins main claims. And I don't think
I really lived up. They didn't really have a way
of getting bitcoin to the protesters in a way that
was trust list and could avoid blockage. Well, one of
(13:51):
the things that the truckers did is they like put
a bunch of wallet addresses on their signs and the
size of the trucks, and they're like, send us money here,
and then various regularly says well, like we're just gonna
but you know, on the other hand, like there's no
like I think, you know, I remember so after that happened,
I remember seeing these discussions even among many like sort
(14:11):
of bitcoin proromis like oh, they shouldn't have like, uh,
you know, made the wallets address is so public, which fine, maybe,
but I don't think I ever saw like a great
alternative solution, and you know, it's like, Okay, let's say
you are going to be the focal point for disbursing
the money. I'm going to send it to you, and
you know who the truckers are privately, and you're gonna
(14:32):
dispurse it. How do I trust you? How do I
know you're not gonna pocket it? Etcetera. And so even
like if you could find a way like around the
public wallet episodes, like, you still have the problem of
trusting the intermediaries. So it's very tricky. And so I
thought that that was like a pretty good test of
whether you know, like bitcoins core claims and censorship resistance
could be defended, and I thought it was lacking. Is
(14:55):
there anything that you're seeing in the response to the
fallout from algorithmic stable call Three Arrows, Capital Celsius Voyager
SPF f t X that is suggesting what the next
crisis could look like? So I did actually have one
thought on this specific question, which is that one of
the things you're hearing about now in the wake of
f t X is this concept where they say, okay,
(15:16):
crypto entities, particularly centralized ones, if they're going to be centralized,
should produce some sort of proof of reserves. And this
idea that with cryptographic technology you don't necessarily have to
reveal your entire balance sheet or all the items on it,
but you can prove your solvency in some way. And
so you have some snapshot of coins that are yours
and you could prove your solvency. And the first thought
(15:39):
that went to my mind was sure, you might be
able to do that, but how do you know that
the marks are true? And of course in trand FI,
you know, two thousand, two thousand nine, it was always
like level on, level two, level three, Mark Smith, That's right,
And we saw that a bit with f t X
because part of the story is how much of the
ft in seram tokens they had, and I think many
(16:02):
people would say that those coins were marked Smith. You know,
if the next stage of okay, what lessons learned from
f t X, every exchange has to sort of like
have some sort of cryptographic proof of solvency, then I
think the next crisis after that could have something that's like, yeah,
but where did these prices come from and how reliable
are they? Because we do see that of course with
(16:22):
the f t T and serum question with f t X,
and I'm not sure that like a proof of reserves,
had it been in place for f t X, would
have necessarily been robust against that failure. Thank you so
much for coming on the show. Thanks for having me.
You can find more of Joe's work on the Bloomberg
Ceminal and on Bloomberg dot com, and of course on
the Odd Lots podcast, as well as the Odd Lots
(16:43):
News less Of, and be sure to check out our
twice weekly news less of Bloomberg Crypto. This is Bloomberg Crypto,
a daily podcast from Bloomberg and I Heart Radio. For
more shows from I Heart Radio, visit the I Heart
Radio app, Apple Podcasts, or wherever you get your podcasts.
(17:05):
Send us your comments, questions, or suggestions for the show
to Crypto at Bloomberg dot net. The supervising producer of
Bloomberg Crypto is Vicky Verglina. Our senior producer is Janet Babin.
Our producers are Mohammed Faruk and Sharon Barriro. Our associate
producers are Ty Butler and Moses on Them. Desta wonder
(17:26):
At is our engineer. Original music by Leo Sidrin. I'm
Stacy Marie schmal, We'll be back tomorrow.
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