Code Is Not (Always) Law

Key to this egalitarian standard has been the idea that the code is the code, and that is what matters most. Judges, regulators and politicians may try to set parameters around what types of financial services can be accessed and by whom, but in crypto, such restrictions cannot apply (except to the extent that centralized companies, like Coinbase, must implement KYC/AML procedures).

The Funniest Anon on Crypto Twitter

Bitcoin, on the other hand, is a movement with a destination. “I’m here for the revolution,” he said. Crypto, especially DeFi, or the subsector working to replace actual financial operations like credit extension, banking and exchanges with intermediary-less, self-executing smart contracts, might beg to differ.

Antonio Juliano: Uprooting a Successful Exchange to Explore the Cosmos

But for Juliano, Cosmos, which is like a blockchain for blockchains, offered the most compelling vision for scalability. “We need more on the order of 1,000-plus transactions per second,” he said. Cosmos offered Juliano the customizability he needed to finally achieve his vision for dYdX, which has evolved over the past half-decade. This includes building a protocol–specific mempool, to store unfinalized txns, and finding the perfect number of validators, to balance execution and decentralization.

Hayden Adams: From Ethereum Idealist to Business Realist at Uniswap

In 2018, just a few months after Hayden Adams was introduced to crypto (by Karl Floersch, who also appears on the Most Influential 2023 list), Adams flew to South Korea to attend the Deconomy conference. He had been laid off from his first job out of college, a Siemens mechanical engineer, in mid-2017, and spent the intervening time learning to code, beginning essentially with beginner’s-unfriendly smart contracts.

Pascal Gauthier Gave Crypto What It Needs – And Earned Jeers

In 2014, Gauthier founded Kaiko, which was originally named Challenger Deep (inspired by the deep sea submarine that explored the Mariana Trench). He’s also had advisory roles at crypto startups OpenX and Index Ventures, among others, and established a joint venture between Ledger, Japanese bank Nomura and asset manager Coinshares called “Komainu,” which is exploring blockchain use cases.

Cuy Sheffield: The Reason Visa Is ‘Everywhere’ in Crypto

For 2024, the Visa Crypto team is focused on growing Visa’s payment volume and role as a leading on and off ramp for consumers to move between fiat and digital currencies. We believe that crypto is not only a new asset class, but also a new payment network that can complement and enhance our existing offerings. We want to provide our users with more choice, convenience, and security when they interact with crypto, whether it’s buying, selling, spending, or earning.

Avery Ching: Aptos Led a Year of ‘VC Chains’

Aptos and Sui, being constructed by Mysten Labs, also use the same custom programming language (Move, developed for the quashed Facebook stablecoin project), are being developed primarily by ex-Meta employees and even raised hundreds of millions of dollars from venture capitalist investors (a16z, FTX Ventures, Coinbase Ventures, Binance Labs, among others). Meta, reportedly, has given its blessing to both, but hasn’t disclosed whether it invested in either.

Lisa Neigut: Reinventing Lightning to Reinvent Bitcoin

Bitcoin, the first cryptocurrency, is sometimes derided for being slow to adopt new innovations, a point Neigut contends. At Consensus 2023, for instance, she said the largest blockchain (by market capitalization) is poised for a “Cambrian explosion” of layer 2s that will accelerate adoption and development of the chain, including the one she’s working on.

Larry Fink: Wall Street’s Biggest Bitcoin Believer

For years, the U.S. Securities and Exchange Commission has been hesitant to approve a spot bitcoin ETF, in part out of concerns about market maturity and manipulation. (There are ETFs in the U.S. that own bitcoin futures, but spot ETFs would give investors more direct exposure to bitcoin.) BlackRock, one of the leading firms on Wall Street, simply by showing interest, helped to legitimize the effort and shows there is likely demand for such a product. Several other traditional financial institutions including Fidelity, Franklin Templeton and VanEck, and a bevy of crypto-natives like Bitwise and Hashdex, followed suit in applying to list their own BTC ETFs.

Casey Rodarmor: The Bitcoin Artist

Casey Rodarmor is not starving, but he is an artist. And like many intellectuals, he cuts a decisive figure. It’s not that Rodarmor is looking to anger; he simply found something that he thought needed doing. Unfortunately, many of his contemporaries have simply not caught up.

If you’re not up to speed: This year, Rodarmor, a long-time Bitcoiner who has made actual code commits to Bitcoin Core, unveiled what he calls Ordinals Theory. In popular parlance, Ordinals are often referred to as “NFTs on Bitcoin.” It’s a phrase that might make Rodarmor, a California native, with as sunny a disposition as he can be ornery, shudder.

This profile is part of CoinDesk’s Most Influential 2023. For the full list, click here.

Click here to view and bid on the NFT created by Rhett Mankind. The auction will begin on Monday, 12/4 at 12p.m. ET and ends 24 hours after the first bid is placed. Holders of a Most Influential NFT will receive a Pro Pass ticket to Consensus 2024 in Austin, TX. To learn more about Consensus, click here.

Click here to view and bid on the NFT created by artist name. The auction will begin on Monday, 12/4 at 12p.m. ET and ends 24 hours after the first bid is placed. Holders of a Most Influential NFT will receive a Pro Pass ticket to Consensus 2024 in Austin, TX. To learn more about Consensus, click here.

“It’s one of the worst acronyms I’ve ever heard,” Rodarmor said, referring to the initialism for non-fungible tokens, in an interview in early November. “First of all, it’s very financial for something that is, like, actually interesting and artistic. And then you tell them what the acronym stands for and they don’t know what it means. Fungible? And then it’s a negation. It’s just terrible.”

He said he strives to use “evocative, interesting language” that “accurately describes” what he’s talking about. That’s why his preferred term for “Bitcoin NFTs” is “digital artifacts.” At times, you might also hear terms like “inscriptions,” or “rare sats” (short for satoshis, the smallest denomination of BTC) or “digital art objects.”

I don’t mean to be a massive pedantic a–hole.

Casey Rodarmor

“I don’t mean to be a massive pedantic a–hole,” he said. But language matters to the high school dropout. His mother is an author and his father a former editor at PC World Magazine. He grew up with words counting for something and a lot of computers around, though he didn’t learn how to code until he mostly taught himself later in life.

“Personally it kind of irks me, but I can’t do anything about it, that people don’t distinguish between ordinals and inscriptions,” he said.

Indeed, what is the difference? It might be best to start at the beginning.

Bitcoin Ordinals vs. inscriptions

First, there was Bitcoin, the distributed computing network that ushered in a private, digital currency called bitcoin into the world. Bitcoin can be sent peer-to-peer, or directly, without an intermediary. It is a protocol and a currency that many users, including Rodarmor, like because there is a finite number of bitcoins (21 million). Altogether, this means Bitcoin is resistant to censorship and inflation.

“I don’t really have a ‘hard money’ or ‘gold bug’ background. But I think it would probably be good if we had money that didn’t inflate,” Rodarmor, born in 1983, said. He added that he became politically aware in his 20s, and that he thinks “the government is incompetent … because they have bad incentives.”

Bitcoiners rejoice. You may not like to hear it, but Rodarmor is one of you.

Indeed, many Bitcoiners this year described Rodarmor as an enemy of Bitcoin, because of the Ordinals Protocol he built that allows people to “inscribe” data onto bitcoins. This, Ordinals critics allege, breaks the fungibility of bitcoin (in a similar way that if a coin is badly scratched, some people may not want to cash it), reduces privacy (a marked coin is an identifier) and clutters the chain (NFTs have a reputation for being frivolous junk).

Rodarmor, obviously, disagrees. He used to be far more willing to engage with critics and to try to educate them. For instance, in a Q&A on the Stacker News forum in January, shortly after Ordinals launched, he responded to a question raised about how inscriptions will interfere with bitcoin’s exchangeability.

That a marked sat is less fungible “is probably sort of true,” he wrote, “but it’s not actually a problem in practice, since everyone can just ignore ordinal numbers and inscriptions.” Ordinals Theory is essentially just a “lens” for properly ordering satoshis in order to view inscriptions, that is, should anyone choose to “inscribe” a “digital art object” onto a satoshi.

“Satoshis are uninscribed when they come into the world, unstamped metal rounds that can be pressed into a coin,” Rodarmor said in a podcast in March.

In fact, Satoshi Nakamoto, the pseudonymous inventor of Bitcoin, added a similar feature to Ordinals in one of the protocol’s early codebases. Although it was eventually removed, former Bitcoin developer Jeremy Rubin found an “atoms” function that would doctor up a random bitcoin once per block, which would make a scarce asset even more scarce.

Likewise, contrary to popular belief, the Ordinals protocol could have been built for Bitcoin beginning on “day one,” Rodarmor said. It has become common wisdom that the ability to “inscribe” these assets was only unlocked after the so-called Taproot update last year, which created a new transaction type for the network.

The Taproot upgrade helped, but the Ordinals protocol was always possible, if only someone had the idea.

Rodarmor’s inspiration came from his interest in generative art, work that is created autonomously using prefabricated algorithms, which has taken on a particular life of its own within the NFT scene, and his desire to create his own generative artworks.

Although he was quite taken by some of the artists working on Ethereum, in particular “Art Blocks” creator Erick Calderon, when he went to code his own smart contract on the system, he walked away feeling disgusted. “Terrible usability,” he said.

So he decided to make his own version on Bitcoin. “The idea behind this project was like ‘Oh, wouldn’t it be cool if I can make and sell my own digital art? And so, you know, of course, I got massively sidetracked” building the protocol, he said. The plan is still to generate art eventually, but at the time of our interview he said he had made “a grand total of one inscription.”

He said these types of all-consuming projects have happened in the past. About a decade ago, for instance, he started working on a musical instrument that used capacitive sensors and a microcomputer that you could play with your hands, not unlike a theremin.

“I went through this whole fabrication phase where I was making silicone pads with embedded conductive fabrics and using a laser cutter to get these different shapes of metal and pouring rubber molds to make control surfaces…” he said. He said he hasn’t touched the instrument since.

There was also a phase where he was making visuals for electronic music, programming everything from “scratch.” Most recently, he’s been making pottery.

Rodarmor said he’s especially attracted to art that serves a purpose; if something is purely “conceptual,” he said it can be boring. At the same time, however, his favorite works are “large-scale, abstract metal sculpture.” Essentially anything that is austere and geometric.

Though he never said as much, it’s clear that coding for Rodarmor is a type of art. Or at least it can be an artistic process. In fact, he described his “processes” for creating spinning pottery wheels and coding trance-like visuals in almost the exact same way.

“It’s about sitting there and writing an algorithm and tweaking it over and over and over again until you get something new,” he said.

Code can obviously be functional, and, in most cases, it is. Software development has essentially been Rodarmor’s only job over the years (outside of a stint of odd jobs working at a clothing store call Mr. Rags, as a film projectionist in Berkeley and video game tester around the time the Gameboy Advance came out before he got California’s version of a GED). He worked for a stint at Google, and later at Chaincode Labs.

Ordinals, for him, was a labor of love. He had saved up a bit of a nest egg working his previous tech jobs that allowed him to fund development. He told me, and has said in other interviews, he’s received tips in bitcoin, but he’s not sure if that “took him out of the red.”

And while Ordinals has been uniquely successful – at time of writing, there have been more than 45 million inscriptions made, generating just under $1 billion in total fees on the Bitcoin network, according to data on Dune Analytics – it can often feel like unappreciated work.

This summer, Rodarmor essentially went dark. After doing months of interviews (including for this publication) and podcasts and reaping the hate of Bitcoiners who despise Ordinals on social media, he felt like he needed to step back. At the time, he said, he wasn’t sure if he’d return.

Part of the issue was just the fundamental unseriousness of the conflict. Bitcoin is an open-source project that anyone can adapt, and Ordinals is a protocol that you can choose to use or not. Getting mad at Rodarmor is as pointless as getting mad at BlackRock for “corrupting” the ethos of Bitcoin by applying to launch an ETF.

Plus, before Ordinals there was no convincing use for Bitcoin that would generate the fees that will eventually be necessary to pay for the network’s “security” once the “subsidy” runs out. Every “digital art object” inscribed on-chain means fees are going into miners’ pockets, who pay for the specialized chips and electricity that keep Bitcoin humming.

“The most interesting thing with ordinals is forcing bitcoin to reckon with the ‘is blockspace solely for native transactions’ debate,” Castle Island Venture partner Nic Carter said in a direct message. “If the NFT community embraces Ordinals as a top-3 NFT system, I could see it being a meaningful share of Bitcoin’s long-term block space, say 20% over long periods.”

The ‘Mad Max of capitalism’

This is the case whether you view inscriptions as art or junk. But in either case, Bitcoin was created to be a free-for-all, the “Mad Max of capitalism,” as Rodarmor said, meaning that if you can pay, you can play and use the blockchain for whatever you want.

This is to say nothing of the legitimate technical advantage the Ordinals Theory represents for NFTs. In almost all cases, on other chains, NFTs are just blockchain signatures appended to media without that media being appended to the blockchain. There have already been cases where an NFT project was lost after the website hosting the content has gone down.

That’s partially why a few NFT projects, including the highly influential Bored Apes series by Yuga Labs, have recreated themselves on Bitcoin. OnChainMonkeys went a step further and abandoned its original series that initially launched on Ethereum.

“Due to their longevity, inscriptions may become the first digital form of high art, and the most important form of digital art ever created,” Rodarmor wrote in the Q&A interview shortly after Ordinals launched.

To be sure, Ordinals are not without their problems. Part of the reason Rodarmor re-emerged from his sabbatical this fall was because a massive flaw with how some ordinals are indexed was uncovered. It was the result of a mistake he made while coding the project, and because Ordinals is immutable it cannot be changed.

Rodarmor calls affected inscriptions “cursed” and initially proposed a way to “bless them” by renumbering the assets, in the first blog he published upon his return. This idea caused rancor among collectors who bought or created inscriptions specifically for their “rare” placement in the Ordinals register.

He and Raphjaph, the developer to whom Rodarmor handed off the ORD protocol, instead decided to address the issue for all inscriptions going forward but not retroactively. The whole process of making a mistake in public code and then working to address the issue by taking on feedback from users is something new for Rodarmor.

It’s also been an “iterative process” learning to live with the love and hate of launching such an influential and contentious bit of software. Rodarmor said he’s an avid attendee of Bitcoin Meetups, and that in person most Bitcoiners either love the idea of Ordinals or are indifferent. It’s only online where the scale and anonymity of the feedback can be overwhelming.

“Casey is the most knowledgeable bitcoiner I’ve ever met, He literally knows everything about bitcoin and has been obsessed with it for like a decade,” Erin Redwing, co-host of Rodarmor’s podcast “Hell Money,” said in a text message. “He would never self-describe this way, btw. He’s very humble.”

Indeed, a BIP, or Bitcoin Improvement Proposal, Rodarmor applied for Ordinals still has not been accepted by Bitcoin Core developers, even though it is not making a formal change to the codebase, just a way to formally document “what has already happened,” he said. He laughs about it nowadays.

“I’m the kind of person that if I’m not working on something, I’m often bored and kind of depressed,” he said “So being back working on it makes me happy.”

Paolo Ardoino: The Hardest Working Man in Crypto

People use tether. It is used to trade, to hedge, to transfer, to pay, to bridge, to exchange, to value and to take account. In other words, tether is used like money. It is used the same way a U.S. dollar is used. In fact, that is the point — Tether creates tethers to bring dollars on-chain, and now, because dollars are on always-running and globally-accessible blockchains, dollars are available around the world, anytime and anywhere.

Paying for Use Slows Down Crypto’s Search for a Use Case

Worse, DraftKings failed to maintain its validator’s performance and was kicked off the network last month — despite receiving financial and technical support from Polygon as well as special privileges (like the ability to take 100% commission from delegators, well above the norm of 5%-10%).

Everyone Needs a Manifesto

Buterin, as mentioned, is keenly aware that digital technologies can be used to exert control, erode privacy and further authoritarianism. He considers how industrial factory farming is likely to cause a future pandemic, given that animal diseases often pass to humans like measles did. He spends a lot of time considering the hot topic of the day, the risks of non-aligned, or rogue, AI.

Breaking Down the Bankless Backlash

BanklessDAO, meanwhile, legally speaking, is an organization that does not even exist. The DAO was founded in 2021, amid a bull run that saw bitcoin rocket $69,000, and so while it counts just under 30,000 members on Discord, it’s hard to judge how many joined and left. Hoffman described the DAO as a “very flat” entity composed of “sub DAOs,” including units focused on consulting and publishing, an audio and video guild and something called “Fight Club.”

Is Binance Big Enough to Survive a $4.3B Fine and Founder CZ’s Ousting?

Further, Binance appears to be overcollateralized for many of the largest assets on its books, like bitcoin (BTC), ether (ETH), tether (USDT) and others, meaning Binance’s net balances are more than it owes customers. In other words, if every Binance customer withdrew every bitcoin they owned, the exchange would have bitcoins to spare.

‘They’re Playing a Game’: What New Yorkers Think of the SEC’s War Against Crypto

Emma Sanchez, in Tuckahoe, for instance, didn’t have her mind made up on crypto itself but thought “regulation is a good thing,” at least generally speaking. While Jason D., who works at a local metals machining facility, said that crypto represents competition to established financial actors, and that’s essentially all you need to know about why regulators have taken such an aggressive approach towards crypto.

Does Worldcoin Need a Reevaluation? Understanding Sam Altman’s Crypto-AI-UBI Experiment

Altman, apparently, “was not consistently candid in his communications with the board.” Little else was said, leading to speculation. OpenAI, the developers of several artificial intelligence tools, including the fastest app to gain a million users, ChatGPT, is often called “the most important startup” in the world.

Disney Does NOT ‘Partner’ With Crypto Companies

I mean, as I argued, Dapper’s earlier experience could also be called successful by the standards of crypto. NBA Top Shots, where Dapper pioneered the concept of licensing beloved IP to sell tokens, does not see much action today, but at one time it was essentially the crown jewel of Dapper properties and significant part of the reason Dapper was, now in hindsight, comically overvalued.

‘We’re Not Asking for Special Treatment’: Coin Center on the Proposed IRS Broker Rules

The so-called broker rule, laid out by the IRS in a tax reporting proposal has been at times called unconstitutional, unprecedented in scope and an existential threat for the cryptocurrency industry. Indeed, by expanding the definition of a broker — a well-defined term in the context of traditional finance, with some analogues in the digital asset industry — to just about anything that touches code in crypto, the proposed rule would likely be “overbroad.” The rule has been officially adopted, the IRS is holding back-to-back hearings on the proposal, and has extended the public comment period — over 120,000 responses have already been filed.

Disney Does NFTs Again in Partnership With NBA Top Shot Makers Dapper Labs

I asked about other restrictions around the apps, however, and did not hear about anything geographical, though the site wasn’t technically live when I was doing research for the article. On promotional material it’s noted: “Fans in Florida can now collect and trade dynamic pins in real time alongside other fans in California, France, India, Japan and elsewhere around the world,” though I am unsure if that just means for the waitlist. (Will update if Dapper gets back.)

CME, Where Institutions Trade Bitcoin Futures, Flipped Binance. Is That as Bullish as It Sounds?

But, if you believe in efficient markets, then you’d have to think a pre-scheduled event that 99.9% of all bitcoin holders know about and eagerly await would have to be “priced in.” Then again, it’s hard to say crypto markets are efficient. And the same guys who thought up the Efficient Markets theory also said it’s impossible to find a $10 bill on the street, because, if it was there, it’d already be pocketed by someone. Yet I find (and lose) money all the time, and crypto traders sometimes make money off of market inefficiencies.

2 Years Ago, Bitcoin Hit an All-Time High. Is Another Rally on the Way?

Let me take you back to a simpler time. On this day two years ago, Nov. 9, 2021, bitcoin maxis were sporting red laser eyes, FTX had just closed a $420 million funding round and rumor had it that dogecoin’s (DOGE) biggest fan, Elon Musk, may host an upcoming episode of “S and L.” On this day, just two short years ago, bitcoin (BTC) set its highest price ever.

Sam Bankman-Fried’s Wildest, Craziest, Dumbest Trades

The massive fraud perpetrated by Sam Bankman-Fried and his posse of insiders has cost the crypto industry an incalculable loss. There’s a numerical figure to attach here — $8 billion worth of customer funds was spent greasing the political wheel and on trifles like luxury real estate and Tom Brady’s endorsement. While the industry may very well move on from the embarrassment of SBF’s “old-fashioned” embezzlement scheme someday, there is a certain, unalterable harm done from learning the supposed smart money in crypto was incredibly dumb.

This post is part of Consensus Magazine’s Trading Week, sponsored by CME. A version of this article was published in The Node newsletter, which you can subscribe to here.

Billions were misappropriated to prop up SBF’s money-losing hedge fund, Alameda Research. This went towards venture capital bets, which catalyzed the liquidity mismatch that ultimately brought SBF down, as well as plugging holes in Alameda’s finances. If at one time befuddled outsiders thought SBF must be making money hand-over-fist, all the evidence now shows Alameda Research was a money sink. Founded as a “market neutral” market maker, Alameda eventually developed into a pump-and-dump firm that inexplicably lost money during the largest bull market to date.

This is a roundup of some of the worst gambles we know Sam Bankman-Fried took during his five years as a crypto-trading behemoth, gleaned from the fallout of FTX, his ex-girlfriend Caroline Ellison’s courtroom testimony and on-chain sleuths. For a man obsessed with calculating the “expected value” of his actions, SBF was remarkably bad at gauging reality — in hindsight that may be expected, considering he thought taking the stand at his own criminal trial and likely perjuring himself was a risk worth taking.

Creation and misuse of FTT

On May 8, 2019, shortly after the founding of FTX, Sam Bankman-Fried launched his own exchange token called FTT. The idea was to give the young platform an “equity cushion,” apparently at a time when getting loans was difficult for the upstart traders. From the outset, the Department of Justice’s cooperating witness Caroline Ellison said SBF had directed Alameda to protect the price of FTT — at first buying the token to prevent it from ever dipping below what SBF saw as a key psychological price level of $1.

Alameda Research had received between 60%-70% of the initial token distribution, and in early 2020, SBF told his technical co-founder Gary Wang to include Alameda’s FTT stockpile in calculating its balances. In many ways, this was the original sin of FTX long before SBF directed head coder Nishad Singh to program the “Allow Negative” functionality used as a backdoor to drain customer funds from FTX.

The largely illiquid token, which would have cratered had Alameda been required to sell it, was used as collateral in billions of dollars worth of investments and loans, and created a false impression of Alameda/FTX’s conjoined “net asset value” (NAV), which convinced SBF it was okay to borrow billions worth of customer funds, Ellison and Wang both suggested on the stand. Without FTT, many of Sam Bankman-Fried’s errancies wouldn’t have been contemplated.

Although FTT was often treated as a bet on SBF’s potential success, the token did not actually represent equity in the exchange. Yet, SBF often treated it as such. As part of Binance’s investment in FTX and SBF’s later buyout of Changpeng Zhao, Bankman-Fried had given his would-be competitor a total 23 million FTT tokens. Worth ~$529 million at the time CZ threatened to liquidate his FTT holdings, that was leverage that eventually enabled CZ to deal the fatal blow to his rival at a time when the world was increasingly worried about Alameda’s solvency.

Two months before FTX went bankrupt, SBF reportedly circulated plans to wind down Alameda. That never came to fruition, of course, because Alameda had by that point had an unpayable $14 billion debt to FTX. Still, some of SBF’s deliberations from the time were entered into evidence, including a Twitter thread he had planned to send had Alameda been dissolved. In the draft, he described Alameda Research as “one of my largest successes–and then, briefly, largest failures–and then again successes.”

While there are many “failures” worth mentioning, SBF noted one of his largest was when “the company” lost track of “millions of dollars worth of XRP tokens.” He explained: “In February 2018, we got lazy–and our accounting was lazy–and we lost most of what we’d made.” In typical verbose SBF style, he continued: “Employees were sad and angry and frustrated, and I had no idea what to do about that.”

See also: The Other FTX Case | Opinion

Although he blamed the company, this loss corresponds with a known attempt by early Alameda employees to toss SBF out of his own company after a string of compulsive and risky trades that lost almost all the trading firm’s profits.

Poor accounting, worse controls

The XRP gambit wasn’t the only accounting flub at Alameda. In a series of recent X/Twitter threads, former Alameda Research engineer Aditya Baradwaj disclosed the trading shop had lost $190 million from security incidents. This was apparently a direct result of SBF’s management, and his Ensam-fueled desire to move at breakneck speed.

“Safety checks for trading would only be added on an as-needed basis, blockchain private keys and exchange API keys were stored in plaintext in a file that several employees could access,” Baradwaj alleged, adding that “meant virtually no code testing and incomplete balance accounting.” At one point, for instance, an attacker gained access to Alameda’s private keys that were held in a “plaintext file,” enabling him to transfer $50 million “out of some exchanges.”

On another occasion, an Alameda trader lost $40 million in a yield farm on a new blockchain. Then the largest loss happened after an Alameda trader, who was unnamed in Balaji’s account, lost $100 million after clicking on a DeFi phishing link that was promoted in a Google ad.

At various times, the Jane Street veteran SBF described Alameda as a “market neutral” market maker, a critical piece of crypto infrastructure and a “quant” trading firm. Market makers make money by supplying liquidity and filling both buy/sell sides of trade, slowly accruing profits from the tight “spreads” between what people are willing to pay for an asset and the price at which it can be sold. To some extent, Alameda was no different — apart from all the frontrunning.

But even though Alameda knew what trades occurred before other FTX customers, giving it an advantage, it still sometimes lost money performing basic functions. The so-called MobileCoin (MOB) incident, for instance, cost Alameda as much as $1 billion, according to the Financial Times.

The trade is actually so stupid, it’s almost difficult to explain. But, in short, in 2021 a trader began buying so much of the thinly-traded MOB token (which at the time was only listed on FTX and Binance), he began to push the price from below $10 to above $60. He then took out loans using FTX’s “unique” margin and liquidation engine, pledging the overly-inflated MOB as collateral. When the price of MOB inevitably collapsed, he defaulted on the loan but kept the capital and Alameda apparently stepped in to eat the loss to prevent FTX from going bankrupt.

Ellison reportedly sent SBF a document titled “Notable Idiosyncratic P&L Stuff” breaking down the trade, which described a “malfunction” in FTX’s margin system. However, during his testimony, SBF said he had actually manually overridden FTX’s risk engine while it was happening, in part because he wasn’t sure if the trade was legitimate. Further, he also directed Alameda to take on the loss because he didn’t want it on FTX’s books, because investors would likely ask questions about it.

In 2021, Alameda had reportedly made over $1 billion in profits which it began to reinvest. Some of Alameda’s largest investments were in the mining sector, which in retrospect happened at the absolute height of the market. The trading firm had invested more than $100 million in a Kazakhstan-based mining facility, just months before the country effectively banned bitcoin mining, as well as another $1 billion into Genesis Digital Assets. The profitability of Genesis then tanked alongside the collapsing price of bitcoin.

Alameda sank $1.4 billion into startups in 2021, according to the Wall Street Journal, up from just $10.5 million the year before. In total, SBF borrowed $2 billion to start a venture fund that invested in more than 500 startups and seed rounds. While not all of those bets have turned south — in particular a $500 million investment in AI startup Anthropic, which is being courted by Google and Amazon, as well as “VC coins” like Aptos and Sui — there were also a few oddities including a fertility clinic, a military drone maker and something called Wordcel.

Of course, SBF wasn’t a complete fool. A market entrant of “the class of 2017,” Bankman-Fried saw the rise and fall (and legal headaches) of ICOs (or initial coin offerings) and innovated on the design. As opposed to launching tokens and raising capital from retail buyers, who undoubtedly would be annoyed and possibly threaten legal action once the token’s price inevitably catered or the promised innovation failed to materialize, SBF developed a different scheme.

Instead of selling people tokens for vaporware, SBF used his trading firm to be a net buyer of his own sh*tcoins. He then used those holdings to leverage up, and take out cash loans. This was a repeat strategy for SBF, which he seemingly did multiple times with tokens like Serum (SRM), Maps (MAPS), Oxy (OXY) and FTT — tokens now known as “Sam Coins” because of his sizable ownership and direct control over the supply. At one point, afraid his own employees had grown too rich, he reportedly changed the vesting schedule of SRM to keep them working.

Alameda was also a net buyer in coins before they listed on FTX, according to research outfit ChainArgos. Between the start of 2021 and March 2022, Alameda reportedly bought 18 different tokens before public listing on FTX, and sold them at a profit.

In a way, this was SBF’s chief innovation in the world of crypto — it was a strategy that ensured tokens associated with his personal brand held their price, and helped him finance a fraudulent empire. But this token-buying scheme was also his chief undoing. Curiously, the Alameda balance sheet that CoinDesk’s Ian Allison reported on was created by Caroline Ellison to try to hide the hedge fund’s level of risk, leverage and indebtedness to FTX. Yet, despite the misrepresentations, Alameda’s massive holdings of FTT, MAPS and OXY were enough to cast doubt on its solvency and ultimately bring down SBF’s entire operation.

The nail in the coffin was when SBF directed Caroline to tweet out FTT’s liquidation price. It’s incredible that anyone ever thought SBF was smart.

Sam Bankman-Fried Will Not Be Crypto’s Albatross

Of course, as former CoinDesker Michael McSweeney wrote in a recent Blockworks op-ed, the industry will likely be irrevocably changed by SBF. In the same way that the collapse of Mt. Gox accelerated the formation of regulations around the world (in particular in Japan, where Mt. Gox was based, and in New York State with the BitLicense), legislatures have mobilized to pass laws to prevent the next FTX.

Who Won and Lost Most in Sam Bankman-Fried’s Criminal Scheme?

U.S. Regulators: Although FTX was technically an overseas exchange, SBF made no bones that he ultimately wanted to capture the U.S. market. He helped craft regulation known as the “Digital Commodities Consumer Protection Act,” and presented it before Congress and regulators like the Commodity Futures Trading Commission. CFTC Commissioner Christy Goldsmith Romero, who reportedly met SBF three times, has since said this “bespoke regulation” was an attempt to plead “for special treatment” for his “fundamentally predatory model.” U.S. Securities and Exchange Commission Chair Gary Gensler, who knew Alameda CEO Caroline Ellison’s father, is also reported to have had a working relationship with FTX. These agencies are known as “disclosures regulators” in that they attempt to ensure companies are following the law, rather than proactively hunting down crime. Though FTX had grown so large, and had so many connections to the U.S. (including U.S. bank accounts, investments in U.S. firms and U.S. advertising campaigns), without these agencies looking in is a blackmark. It’s telling also, that one of the few FTX units to survive nearly unscathed was FTX Japan, which operated under that country’s stringent financial regulations.

Bitcoin 2008: Satoshi Nakamoto’s Busy Few Months Building the Revolutionary ‘P2P Electronic Cash’ Network

Bitcoin is, as Nakamoto described it, an electronic, peer-to-peer currency-like system. It could “become” a currency so long as people ascribe value to it, and that could happen for any number of reasons like wanting to collect interesting things or needing an alternative to using credit cards online, he had suggested. “Bitcoins have no dividend or potential future dividend, therefore not like a stock,” he wrote.” “More like a collectible or commodity.”

In Crypto’s ‘Autonomous Worlds,’ Creators Are Architects and Users Are Stakeholders

In these worlds, creators are not just contributors; they are architects, shaping the very fabric of digital reality. And consumers? They’re not just passive viewers. They become active participants, stakeholders and even co-creators. The lines blur, forming a collaborative tapestry of interaction, engagement and shared ownership.

What’s the Deal With Sam Bankman-Fried’s ‘Advice of Counsel’ Defense

DOJ lawyers, however, have long argued this strategy is besides the point, and have filed numerous documents in the case saying SBF’s lawyers should be prohibited from making it, in part because it might distract the jury from the actual crime. You know, the $8 billion embezzlement scheme SBF has been accused of. By and large, Kaplan has been partial to the prosecution here, and even prevented SBF’s counsel from bringing up his lawyers’ possible complicity in opening statements and permitting Can Sun, former general counsel at FTX, to testify under a non-prosecution agreement.

Ripple Is on a Winning Streak (but the Game Isn’t Yet Won)

For a while, it seemed like Ripple may not even survive. The firm was flush enough (thank you programmatic sales, bay-bee), but no one knew what would result from what is still, arguably, the most significant regulatory action taken against a crypto company to date. Firms like Telegram and EOS were sued, they settled and were given “slaps on the wrist” (relative to amount of money involved).