Suffice it to say, FTX and Sam-Bankman Fried are in a crisis that could threaten them being in prison, assuming fraud happened.
Here's the initial post to the FTX crisis:
So my question is, what should EAs do in response, and how can they avoid something like this happening again?
One thing that I think would be helpful is a discussion of the corrosive effect of certain kinds of dishonesty and criminality on the communities we live, big and small. Some kinds of acts tend to weaken the trust we have of our communities thus crippling our abilities to act together, which is often critical.
This is why, even from a pure utilitarian perspective, there should be a strong presumption against certain kinds of dishonesty and criminal activities. The knock-on effects, upon discovery, are often orders of magnitude larger, and negative, than the direct effects. And, since we think in EV terms, when we incorporate this into our decision making, criminal and/or dishonest decisions are seldom justified.
Perhaps the discussion of the perils of using socially corrosive behavior to further one's ends is discussed in EA, but I have not seen it much in my experience.
One thing we can do as a community is come up with ethical principles for earning to give and expect our donors to adhere to them.
It's good to be more ambitious and risk-loving than most entrepreneurs and other people who aim to make money, but you have to do it responsibly. Being cooperative and acting with integrity are in CEA's guiding principles; we need to articulate publicly and prominently that they also make the world a better place. Personally, I lean towards rule utilitarianism, so this view is second nature to me. But we should be able to justify this view using the thinnest possible version of consequentialism.
Also, good risk management is important to every successful business regardless of its risk appetite. FTX was insanely over-leveraged and exposed to wrong-way risk, which made it vulnerable to imploding in the way it did. Risk is fine; stupidity is not.
Absolutely never become involved with cryptocurrency in any way, shape, or form ever again. It's poison on every level. It's environmentally devastating. It enables crime. And, well, it's a Ponzi scheme.
A good read about crypto: https://www.currentaffairs.org/2022/05/why-this-computer-scientist-says-all-cryptocurrency-should-die-in-a-fire
Re environmental devastation: Ethereum, the 2nd largest crypto, now runs on Proof-of-Stake, using 99.99% less energy than it did before September[1], and a total carbon footprint of only 870 tonnes CO2e, so I don't think it is valid to tar all crypto with this brush.
New investors' money pays previous investors whenever someone buys Ethereum from someone else. That's what buying crypto fundamentally is: a new investor is paying a previous investor. That's the fundamental building block of the crypto "economy". That's why they're all Ponzi schemes.
It's happened many times already. The price of crypto collapses regularly, and then people who haven't learned the obvious lesson decide to "buy the dip".
The difference is that a stock confers part ownership of a business, whereas crypto's value is entirely speculative; it's only valuable because other people think it is. The entire "value" of a cryptocurrency is derived from hype, like any Ponzi asset.
The more money you have, the more crypto you can buy. Thus, between collapse cycles, "investors" make profit in direct proportion to the amount of pre-existing wealth that they could afford to invest. In this way, speculative assets systematically transfer wealth from poor to rich.
New investors' money pays previous investors whenever someone buys Ethereum from someone else. That's what buying crypto fundamentally is: a new investor is paying a previous investor.
How is this any different from buying stocks, or buying anything else for that matter. How does it make it a Ponzi? Where is the pyramid? Where is the insolvency?
It's happened many times already. The price of crypto collapses regularly, and then people who haven't learned the obvious lesson decide to "buy the dip".
All markets have crashes. Crypto has had some severe ones, and is high risk, sure; but it hasn't ever gone to 0 (like all actual Ponzi schemes always do eventually).
The difference is that a stock confers part ownership of a business, whereas crypto's value is entirely speculative; it's only valuable because other people think it is.
Crypto (or at least Ethereum) is part ownership of a technology. All investing is ultimately speculative, and all investments only have value because other people think they do and are willing to buy them for some price (money is a collective fiction etc).
The more money you have, the more crypto you can buy. Thus, between collapse cycles, "investors" make profit in direct proportion to the amount of pre-existing wealth that they could afford to invest. In this way, speculative assets systematically transfer wealth from poor to rich.
Again, the the same can be said for all investments; crypto isn't special in this regard. Sounds like your problem is more with capitalism itself. Why hasn't all the money in the world been transferred to a few rich people already? Because rich people sometimes lose fortunes too! (And many have on crypto!) How do people ever become rich starting poor? Investing in speculative assets can be one way; and it has happened many times with crypto - if anything, I think crypto has disproportionally benefited relatively poor people, who got in before most people with already established fortunes. A lot of new money fortunes have been made in crypto (same also for people who bought Apple, Google and Amazon stock 20 years ago).
"How is this any different from buying stocks, or buying anything else for that matter?"
See point 3 in my previous comment.
"Crypto (or at least Ethereum) is part ownership of a technology."
No, it's not. You don't have part ownership of anything. You haven't bought up intellectual rights. You have your name written in a ledger. That's all "ownership" of crypto is: your name is written in a ledger, indicating your ownership of... nothing. 'Part ownership of x' could be used to describe anyone's stake in any Ponzi scheme ever.
"All investments only have value because other people think they do."
If you buy a 1% stake in a company, you own 1% of its assets. Physical, tangible things that have a capacity to do useful economic work. If you buy land, you can charge rent for its use, or occupy it yourself. If you buy a computer, you can use it to do work. If you buy an orange, you can eat the orange to metabolize its nutrients. In contrast, a bitcoin has zero capacity to do useful economic work; its "value" comes from the potential to find a bigger fool to sell it to for profit.
"Why hasn't all the money in the world been transferred to a few rich people already?"
All the money in the world is being transferred to a few rich people. This is what is currently happening. See Pixel Wealth.
"I think crypto has disproportionally benefited relatively poor people, who got in before most people with already established fortunes."
No.
approximately 0.01% of bitcoin holders control 27% of the 19 million bitcoin in circulation.
And to remove any lingering doubt:
I'm not a fan of Bitcoin either (it's basically just digital gold - what do you think of gold as a store of value?). Much prefer Ethereum. It is a physical (distributed) computer system has many economic applications. Ether has been likened to digital oil (but obviously much more green - as per my original comment).
Bitcoin is NOT like gold. Gold, unlike cryptocurrencies, is a tangible item that can be used for things. (Electronics, jewelry, etc.)
And unlike bitcoin-hoarding, with its massive losses in the forms of electricity and computer hardware, gold-hoarding isn't a massively negative-sum game. But that's beside the point: crypto is a Ponzi scheme and gold isn't because gold can do economic work and cryptocurrency can't.
I've been over Ethereum's fundamental toxicity - both the fundamental toxicity of PoS and the fundamental toxicity of cryptocurrencies in general - in my previous comments.
Gold is valued way over and above its direct economic value for making things! It's valued primarily for being a store of value (as bitcoin is - hard to fake, divisible, transportable etc). Some people use bitcoin mining rigs to heat their home. I think that's pretty equivalent to using gold in electronics (i.e. useful economic work, but not the primary source of value).
I don't think any of the fundamental toxicity you mention regarding PoS or Ethereum is unique to crypto - it applies to most forms of capital (stocks, bonds, private equity, real estate).
Downvotes here seem unfair and culty for an honest opinion. (Though I admit I haven't checked the linked article, and maybe it's bad.)
I am not invested in crypto in any way and I also believe that most of crypto is a scam, yet there are some diamonds in the mud. The fact that this technology, for instance, enables prediction markets with actual money (regardless of the feelings of the regulators) seems very valuable to me. I would recommend caution with this technology and industry, not outright rejection.
EAs should:
I wrote a post on damage mitigation ~2 days ago, but it got brigaded by a bunch of poorly-informed, overconfident people:
https://forum.effectivealtruism.org/posts/HJbd7Fwzh6BZGK6En/two-key-strategies-to-mitigate-the-damage-from-losing-ftx-2
I'm having a bit of trouble articulating why, but I'm not that bullish on the EA forum as the best place to coordinate on this.
I think perhaps a public education course - as much for EAs themselves as for everyone else - that while the ends do sometimes justify the means, they often don't, and when using extremely dodgy means you have to be unbelievably confident that your ends are worth it and that no other means will do. In short, I think EA should come to firmly reject the philosophy of the street mugger - that he (we) is justified in taking other people's money just because he (we) thinks or even knows that he (we) can do better things with the money than the people in question. People have rights and we shouldn't steal from them, and honesty, decency, civility are all very important things. AI risk or pandemic prevention of course might be important too, but it's not necessarily more important than maintaining basic societal norms like "don't steal". In short, EA's chronic and severe epistemic overconfidence problem should be publicly addressed.
New investors' money pays previous investors whenever someone buys Ethereum from someone else. That's what buying crypto fundamentally is: a new investor is paying a previous investor. That's the fundamental building block of the crypto "economy". That's why they're all Ponzi schemes.
It's happened many times already. The price of crypto collapses regularly, and then people who haven't learned the obvious lesson decide to "buy the dip".
The difference is that a stock confers part ownership of a business, whereas crypto's value is entirely speculative; it's only valuable because other people think it is. The entire "value" of a cryptocurrency is derived from hype, like any Ponzi asset.
The more money you have, the more crypto you can buy. Thus, between collapse cycles, "investors" make profit in direct proportion to the amount of pre-existing wealth that they could afford to invest. In this way, speculative assets systematically transfer wealth from poor to rich.