This post originally appeared on ZeMing M. Gao’s website, and we republished with permission from the author. Read the full piece here.
I already wrote about FTX and digital currency exchanges in general (see, Crypto exchanges are an obstacle to blockchain and DLT). Mainly due to disgust, I try not to make more comments on FTX, but couldn’t help because the story is being spun in directions that are away from the core truth.
This post on LinkedIn is an example: Sex, drugs, and leverage – Critics are wrong. Why the FTX story has nothing to do with crypto.
The post made interesting points, but it is part of the narrative to mislead people to believe that FTX happened only because SBF is a terrible person, but crypto is good because CZ is a better person.
Personality isn’t the key. The root problem is crypto itself and the exchanges that were created for it.
The disaster has a lot to do with crypto uniquely (I mean crypto, not blockchain and DLT which are very different things).
Crypto is a power-function to kill, constituted of multiple multiplications to magnify the effect:
Cult (of tech-buzzwords) x Ignorance x Greed x Recklessness x Cleverness (of manipulations).
If you look at these multiplication factors, you will identify both the common themes that exist everywhere, but also something quite unique with crypto.
First, no tech buzzword other than ‘crypto’ has created such a large, blind and devoted cultish following. Things like ‘AI’ and ‘quantum computing’ appear contemporarily but there is no comparison, because AI and quantum computing may stimulate cultish thoughts, but barely any mass actions.
In contrast, Crypto is extraordinarily actionable for the mass to participate.
Second, I can’t find another tech or business field in which the level of open ignorance is even comparable to that in crypto. Judging from how influencers talk about crypto, and how investors’ money, even that from top VCs and famous home offices, poured into the space, a crazier and more foolish scene cannot be imagined.
Third, the greed, recklessness, and cleverness, for some reason, also seem to have reached rather distinct levels in crypto. This is a mystery. It will take combined work of anthropologists, psychologists, historians and technologists to explain. But one thing seems clear, crypto’s unique ability to hide corruption, fraud, and dishonesty behind the ironic veil of ‘trustless’ is unsurpassed. It really gave a new meaning to the word ‘trustless’.
Again, don’t assume crypto is equal to blockchain and DLT. The latter can do better without the former. Contrary to what many assume, the whole crypto frenzy has been the biggest enemy of the real technological development of blockchain and DLT. So there is hope in the bad news.
Follow CoinGeek’s Crypto Crime Cartel series, which delves into the stream of groups—from BitMEX to Binance, Bitcoin.com, Blockstream, ShapeShift, Coinbase, Ripple,
Ethereum, FTX and Tether—who have co-opted the digital asset revolution and turned the industry into a minefield for naïve (and even experienced) players in the market.
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