Hi all,
Welcome to Genesis Block’s special Market Update episode.
Last week saw stunning Enron-like events in the crypto world, where Sam Bankman-Fried, CEO and Founder of FTX (formerly the world’s second largest crypto exchange) and Alameda Research (possibly the world’s worst and stupidest market maker / VC / hedge fund / collective of degens), was revealed to have been a fraud all along who stole funds from the customers who trusted his ‘regulated’ centralised exchange. In light of this, we didn’t think that anyone would be in the mood for a Protocol or Thematic Analysis, and would rather prefer some catharsis and ranting, and a refresh on why we’re actually in this space.
A key takeaway for us:
Narrow down on your thesis of why crypto / Web3 will succeed.
You’re likely not in this space because of a centralised exchange. For example, we’re in this space because of the cost reduction, improvements in efficiency, automation, transparency, and composability promised by blockchain technology, along with the potential for new product sets and opportunities for diversified, novel revenue streams enabled by tokenisation. This is reflected in the themes we’ve covered (Web3 Music, Web3 Games, Real World Asset Tokenisation, Decentralised Social Media, etc.) and the critical analysis we’ve done of protocols that have tried (and many times, failed) to meet these standards (Ocean Protocol, Audius, and Tokemak, for example). If your thesis is not affected by this week’s events (although the timeline for fruition may be), stay calm, reflect, learn, and eventually, move on.
Two more points:
Cobie and Ledger (two prominent crypto influencers) invited Zhu Su (3AC), Do Kwon (Terra), and non-crypto bad guy Martin Shkreli onto their podcast UpOnly during their livestream of the FTX fallout. It doesn’t make sense that, as an industry, we’re back to deifying and forgiving scammers like the ones mentioned above. We’re never going to be able to grow unless we get rid of this attitude and instead focus on those moving the space forward, like the builders innovating with technologies like ZK-Proofs and Wallet Abstraction.
This incident has only brought into prominence the importance of Not Your Keys, Not Your Coins, i.e., self-custody, and permissionless, trustless protocols where all you need to trust is openly verifiable code. Please, get a Ledger / Trezor / another hardware wallet and store your tokens in cold storage. This is one of the biggest benefits of crypto, and while we as an industry still have a ways to go in making it as simple as possible for users to self-custody their assets (reduce the complexity of self-custody, abstract out wallets, etc.), it is critical to use centralised exchanges as little as possible. As Ryan and David from Bankless said, use a centralised exchange only to ‘do your business’ (buy your tokens) and transfer them to your own custody.
It’s going to take time to build back trust. We need to make sure that the next iteration of Web3 / crypto exists primarily on open, permissionless, trustless rails, and that we don’t fall prey (as we have done so uncomfortably often) to hero-worship and blind faith in icons.
And remember:
Not Your Keys, Not Your Coins.
P.S.: The Twitter thread that we never finished going through during the episode outlining the timeline of the FTX Saga:
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FTX, Crypto's Enron?