Sam Bankman-Fried: Crypto’s Wolf of Wall Street

I want you to back into a corner. Give yourself no choice but to succeed. Let the consequences of failure become so dire and so unthinkable that you will have no choice but to do whatever it takes to succeed.

¯ Jordan Belfort, The Wolf of Wall Street

Anyone who has watched The Wolf of Wall Street knows the effect money can have. It is an oft-repeated cautionary tale.

Typically, these stories of greed involve an abuse of normal corporate practices. Take Enron for example. Or hype-induced interest in a new or misunderstood asset class, like penny stocks in the case of Jordan Belfort. The hype brings the money, and the greed takes over. It is tempting to believe that more effective surveillance can effectively limit excesses. History tells us otherwise. Do you remember the Great Financial Crisis?

The sad truth is that the problem is human nature. But is the problem simply greed? Probably not. The call for tighter regulation of crypto markets has been loud and growing. Yet people only solve a problem after a crisis. Regulators are no different. It is also human nature to increase wealth. Now-disgraced former FTX CEO Sam Bankman-Fried was recently featured as “The Next Warren Buffet” on the cover of Fortune magazine.

Even the most reputable institutions in the world, such as the World Economic Forum, were delighted. And the extent of his political influence in the United States is only now apparent.

What role does crypto have to play in the recent FTX/Alameda collapse? On the one hand, not much, Bankman-Fried made his money like many before him: by buying assets at a low price and reselling at a higher price. Crypto was just the asset class he chose to trade.

All the noise and hype has pushed prices to extremes and separated asset valuation from intrinsic value, a traders paradise until the tide turns. As an exchange business, FTX has benefited from buying/selling crypto, with inflated volumes due to the cycle. Underdeveloped supervision and poor knowledge of the asset class created an environment where greed ultimately won out over caution.

It’s tempting to view crypto as a poorly designed experiment.

Before doing so, we should ask ourselves if there are any meaningful examples of crypto projects producing anything of value? Is there a crumb of substance or is it just hot air?

In addition to advances in the digital asset space (which is not a new form of productivity in itself), and some of the exciting new applications of DeFi (like DeSci or collaborative scientific research), a set of initiatives that connect crypto and the real world is decentralized cloud computing.

Networks like Filecoin, Storj and arweave are gaining traction. Launched in 2019, market leader Filecoin, for example, set out to create an independent network of hardware owners providing data storage capacity.

There are now over 4,000 different hardware owners on the network with enough aggregate capacity to house all of Google’s storage needs. The traction also accelerates quickly. In 2022 alone, real-world data ingested onto the network increased 8x with no signs of slowing down. Growth is driven by real-world users like UC Berkeley, Lockheed Martin, and The Internet Archive.

The aspiration of Filecoin and similar initiatives is to build a cloud computing network for the preservation and use of humanity’s data (at a fair price); the infrastructure of Web3, the next generation of the Internet. Sounds useful, doesn’t it?

In the aftermath of crises, the real use cases of new technologies are gradually asserting themselves. Time will show that crypto is no different, despite the current headlines. Hype cycles and busts are a human phenomenon. So why hate crypto? Dig deep enough and green shoots will be visible.

Disclosure: The author is an entrepreneur whose company received grants from the Filecoin Foundation to develop technology for the network.


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