Bankman-Fried, Bankless, and BitBoy Walk Into a Bar...
In response to a highly polarizing regulatory standards proposal from one of crypto's heavyweights, we have crypto in-fighting as a response. Shocker!
Sam Bankman-Fried (or SBF) is the founder and CEO of FTX, a well-known, Super Bowl ad-buying crypto exchange. SBF is now making some waves in the crypto community because of a proposal to help regulators mold a set of standards in the government’s approach to crypto. While there is quite a bit in the proposal that I personally take issue with, the section that I think really deserves applause is the one where he makes the case to tokenize stocks. After detailing the chain of risk involved in a single TradFi stock transaction, he says this:
So if retail makes billions of dollars in a day, then you have tens of entities, each of which potentially need billions of dollars of spare capital, in case any one of the many entities in the chain later fails to deliver. Once the investor’s profit exceeded the regulatory capital of the less well capitalized brokers, those traders were shut down, and in some cases liquidated, to ensure that they didn’t make any more money–money their brokers would not have been able to guarantee. There’s a limit on how much money retail can make in the current equities market structure!
In the quote above, he is essentially describing what happened during the GameStop (GME) short squeeze when RobinHood (HOOD) had to restrict retail investors from buying any more GME stock because of counterparty risk. Tokenizing equity so it could be held in self-custody is feasible and it solves the problem described above. That’s the good.
The Not So Good
While it seems there is some support for what Sam is trying to do in some crypto circles, I would say the highly esteemed freedom-loving crypto pioneers, like Erik Voorhees, have pushed back on a lot of what SBF is proposing. On the notion of wallet address blacklists at the base layer:
That, my friends, is the road to ruin. That is the road to tyranny, ubiquitous surveillance, and the worst dystopian, Orwellian financial system that could be dreamed up. That is the road that every CBDC will take. Crypto—true crypto— must be different, or it has no reason to exist.
Furthermore, Erik lays out precisely why respecting OFAC when it does what it just did to Tornado Cash a couple months ago should be a non-starter first and foremost as a humanitarian concern:
But the OFAC list includes entire countries. It includes the entire nation of Iran, with 83 million people. It is illegal for any American to do business with any Iranian. You know those insanely brave Iranian women standing up against oppression in Iran right now? Those women espousing the greatest American virtue of individual liberty and doing so while literally facing torture and death? If you’re an American, it is illegal for you to interact economically with those women, because of OFAC.
And I’m not even going to get into the problems with SBF’s DeFi recommendations because we don’t have enough time - but they’re abysmal. While Voorhees is eloquent and respectful of a fellow crypto pioneer, popular ‘fin-fluencer’ BitBoy Crypto seems to be going with the bull in a china shop approach. And that brings Sean Adams from Bankless into the bar as well.
Crypto’s Tribalism Problem
BitBoy is very obviously not a fan of what SBF is trying to do and he’s been saying so on Twitter and on his YouTube show. In response to SBF’s thread summarizing the proposal, Ryan Adams took a shot at BitBoy Crypto and BitBoy proceeded to go nuts. Seriously, watch this video… it’s something to behold:
Let’s start with I highly doubt BitBoy doesn’t know who Ryan Adams is because they’re in the same game. They’re crypto content creators with large followings. Unless BitBoy never personally touches his YouTube or Twitter feeds (nonsense), given how the algos in these things work I can’t imagine it’s possible that BitBoy is as wrapped up in crypto to the degree that he is and somehow doesn’t know about the guys at Bankless. Anyway… After seeing BitBoy’s rant, Adams responded with violence at first:
But Adams now seems to be trying to put together a peace treaty. Anyway, I’m not going to comment on what BitBoy said about Adams or how I feel about either of them personally. All I’ll say is crypto scam investigator ZachXBT appears to have only done extensive work on one of them. Here’s the irony in all of this. Ryan Adams and BitBoy should actually be allies at the moment because neither of them like Sam’s proposal:
But again, like everywhere else in society we have tribes. Side note; after watching BitBoy’s tirade, where do you think we are on this chart?
We can never know for sure… if this is indeed the anger phase, we’re probably getting closer to a bottom. It’s also possible BitBoy’s anger has nothing to do with crypto’s recent performance and everything to do with feeling disrespected. Maybe a little of both. But that gets us to the original sin of BitBoy’s content monetization model.
This Is Why I Try To Be Different
Remember a few months back when I wrote about Bitcoin maxis turning on Nic Carter? Or when I discussed the line between sharing information and shilling a token? This is what I said back in June about why I choose not to pimp the audience:
The problem I’ve always had with the ad-model is that creators can easily go down a path where editorial control over the content can be influenced.
Going paid is what can lead to credibility problems down the line when projects or tokens you feature are straight up rug pulls. If I had to guess, I would assume this is Adams’ problem with BitBoy; he has a history and it’s not pretty IMHO. But there may come a time when Adams finds himself in a similar position because he too has podcast sponsors.
Here is what you can always expect from me: I will not take money from any protocol or company that I perform due diligence on. It’s a conflict of interest and I didn’t create Heretic Speculator or BlockChain Reaction to “pump my bags” or sell your attention. I put a lot of hours into this research. I do that so even if nobody buys the research, the effort will hopefully be beneficial to me regardless. It’s entirely up to you if you want see what that effort produces or act on it if you agree with the thesis.
Disclosure: I’m not an investment advisor. I merely share what I do and why I do it. You shouldn’t take anything I say as investment advice and always do your own research when making investment decisions. Cryptocurrencies, tokens, STONKs, and digital trinkets could all go to zero. I have no job and I live in my wife’s basement. I’m the last person on the face of the earth who you should listen to for financial advice or life advice.