People will keep focusing on the individual here but surely they should be questioning the system? In particular the VC's as most of this was actually institutional money.
How on earth did he get £16Billion? Well turns out he went to Stanford same class as Theranos and his Girlfriend whom he made head of the trading arm also went there. She's the daughter of an MIT Econ Professor. It's quite clear FTX only got started because of political connections and back door deals. Sadly this won't be the wake up call that we need to bring back some sort of meritocracy to American society.
A lot of very wealthy people put money into the FTX financing. If there wasn't a major downturn, probably FTX never would have gone under. Us plebeians get a rare view into how business success commonly happens (a network of people force it to happen). Its similar to the epstein scandal, a rare view into another world far removed from the common worker.
Meritocracy isn't a full on illusion, but we also don't have enough data and transparency into modern power structures.
Many investment style schemes will continue on until a recession exposes everything. Much like the Madoff ponzi. It went on for decades until a once in a lifetime financial industry blow up exposed it.
Things that cannot go on for ever don't. The end will likely be occur during some sort of a downturn as that's when there's an increase in the number of people needing to make use of their assets, but the end is inevitable regardless.
A rising tide floats all boats….. only when the tide goes out do you discover who's been swimming naked." This is Warren Buffett's addendum to the famous 'rising tide' quote.
I've actually known a few people involved (as employees) in these kind of frauds, and whistleblowers or some kind of stupid mistake can expose them certainly.
But the business cycle is what really clears even the most clever ones out.
I don't think being an econ professor is quite the position of power you think it is. Source: I have many friends who are professors including econ professors.
The Wikipedia pages of all of these people only relates to their relationship to FTX, they aren't running US fiscal policy.
Well but isn't the point a cohort favors their own? Rather than any old econ professor I think the impactful part was including "MIT". I think it's fair to say there's some difference between that and an econ prof from a small town community college. Same for the bit about Stanford. It's not an area in my career I'm good at, but I'm aware of the contemporary perspective "its not what you know but who you know". In a large enough company this becomes very obvious.
Which reminds me, I need to update my LinkedIn profile. I wish I knew what to post. This is all I can think of:
Day 1: here's my coffee cup <photo>
Day 2: didn't sleep well, oh well
Day 2: here's my coffee cup <photo>
Day 3: feeling refreshed, thanks certa
Day 4: interesting stackoverflow discussion <link>
Day 4: here's my coffee cup again <photo>
That sounds about as interesting as watching rocks break down into dust. I get the "what" of social media engagement, but I don't understand the "how". If I did, maybe I would've gone to MIT.
I guess on (one of) the other sides, there's groups of folks working on stuff, like in "circles" where they draw together, or code together--skill up together. Some kind of commonality keeps them gelled toward something. And I imagine there's no audition or interview for that. It just "happens."
You would think the immense reach of the Internet would allow for greater emergent wins, right? Larger network, larger opportunities. Their goal may not be monetary foremost, but their creativity is channeled into those projects.
I guess if we want it, we develop our capabilities to leverage the next opportunity. Without waiting, we create our own luck. Unending practice, making and learning and repeating. Maximizing the luck surface area, as they say.
But it may not happen on our usual timeline. It may happen in the hours between sleep and work, when we're staring at our bookshelves or bookmarks and thinking, "I really gotta do this thing."
> I don't think being an econ professor is quite the position of power you think it is. Source: I have many friends who are professors including econ professors.
I'm baffled you'd pick this hill.
AFAIK, her dad is the chair of the #1 economics department in the world![0]
Her dad is the former boss of the chairman of the SEC. That may be the single biggest political connection. But both Sam and Caroline's families are extremely well connected on the Hill.
And the customers who signed up for FTX did so because the girlfriend of the owner is an top econ professor?
And you think SBF will escape accountability due to his connections? He won't
If you think those connections helped him get VC funding, I can assure you they help a lot of people and most do not become multi billion dollar frauds. The fact that he is an upper class white guy is the important part, the rest is you just reading way too much into this.
They were clearly implying that his girlfriend father's being an economics professor was somehow a critical part of perpetuating the scam.
The people who were scammed were crypto investors who chose to put their money in an unregulated international exchange. Also many many other exchanges have also fallen apart and their parents weren't economics professors.
Give SBF the due credit and blame for what he created.
The connection is more direct than you might think.
They got millions of VC money to spend on advertising. The advertisement campaign influenced people to put money in an unregulated exchange. The fact that mainstream VCs were putting money into this thing also served somewhat as a signal that this might be legit.
The original (root level) comment actually said "surely they should be questioning the system? In particular the VC's". Did the VCs look at the bios of the founders and CEOs? I can't imagine they weren't at least slightly influenced by this. In the crypto world where a major risk would be regulation by the SEC, I can't imagine having the CEO's dad having a relevant political connection wouldn't be a substantial factor for consideration.
How are they picking a hill? Seems like they are just stating an objective claim without putting any judgement to it. Even if it turns out her father had little to do with it doesn't mean she's less of a crook. I don't see any reason to be partisan about this and embrace every single accusation like supreme truth. There's plenty of it as it is.
It's obvious what I mean. Everyone is clearly bending the truth to create the juiciest narrative but no need to attack people just because they're downplaying the most insane conspiracy theories. This is not a movie script.
You make it sound like the poster is defending her just because they don't agree that the world is secretly controlled by a bunch of economics professors.
This is false. Economics and finance professors at major universities all have some side business as advisors to major companies, foreign governments, etc.
I guess they aren’t Econ professors in the top universities of their countries? Such universities basically represent the technocratic arm of their respective governments, some professors are also consultants to the biggest financial institutions (both private and public).
In a financial services firm I worked for, I had to help this intern (maybe 19, 20 years old). She was well dressed, well spoken etc, but didn't seem too keen on doing any actual work.
Later I found out that she was the kid of a VP who also worked there. Must be nice to have well-connected parents
At least they were just an intern. Look up the Tyson foods CFO. He was just arrested for public intoxication and breaking and entering when he blacked out and wondered into a strangers home and fell asleep in their bed. I saw his mug shot and thought he looked awfully young to be the CFO of a publicly traded, fortune 500 multi-national. He's just 32.
Sure enough, his last name is Tyson. Daddy is chairman of the board. He went to Harvard undergrad and Standford MBA (got in purely on merit, I'm sure). Then it looks like he worked all of 2 years in investment banking somewhere before ascending to the throne of leadership.
It's like they barely even tried to make it look like a meritocracy. Where is the fiduciary responsibility? Seems like an easy shareholder lawsuit.
Stanford, Harvard business schools admit students not based on merit but on pedigree. Just by looking at some one's resume, we can say whether he/she gets admitted to HBS, Stanford GBS. These top b-schools want kids of multi billionaires, kids of famous politicians (both US and abroad), kids who are working at McKinsey, Bain, BCG, etc. Usually, plebes are told to apply to these business schools, who just want more applicants, so that the admit rate can be 2%.
I am more amazed that the lineage was not made painfully aware to you from the start. I have previously seen a VP's kid receive a white glove "job" experience where multiple busy people were expected to keep him engaged. Hardly the stereotypical "have the intern shovel manure"[0] kind of situation I would prefer of marginally useful temp workers.
[0] by this I mean, any drudgery work that falls by the wayside. Not demeaning, just not necessarily exciting
I work at a FANG and the approach to interns is just the opposite.
Give them something interesting that could make for a great VP demo that you’d want to work on if you had the time to do, but are too busy working on actual deliverables.
Interns also get to meet the exec teams and usually the CEO. It’s a great place to be!
I once worked in a financial firm with an intern who did nothing else besides pick his nose. No joke, that's the only thing he did. He made no attempt to do actual work or help our team and no attempt to hide his nose picking.
His father was a senior executive and so he knew he would get a seat on the equity trading desk no matter what, so he didn't care about us. I hated that guy, and I hated him even more because I knew his career would be way more successful than mine would ever be.
The finance industry (and surely other industries) have this concept of "pedigree" that values some people more than others. It's bad for the organizations because poorly qualified nose-pickers get promoted as they coast by in life, while others who are working hard to improve themselves and add value will either get passed over or used as pawns.
Objectively it would be nice to have someone help you get ahead like that. But I often wonder to myself, if your parents are well connected and get you job, does it ever bother those people that it's not who they are that got them hired but rather who their parents are. I'd love to say I wouldn't take help from my family if they were super influential but I honestly don't know.
If they're not doing the work then I doubt they care about what got them hired. Ultimately each person should be judged on their own merits, I wouldn't hold a relation against someone if they still do their job.
Another question to ask... Is the person where they are because of their parents or in spite of them?
If a less qualified, young candidate walks into a higher position, and happens to have well connected parents. Yeah, I am going to default that they got the position because of their parents.
If the children of Jeff Bezos, Bill Gates, etc happen to materialize on an elevated position right out of college, are we to assume that they got their purely out of spite? Maybe they truly are brilliant and deserve the position, but they will always have had a leg up on the competition.
Your company will hire two people out of a candidate pool of 1,000. You're told that Well-connected Walter is one of those 1,000 and is guaranteed a job. Your hiring team is going to go through and interview the remaining 999 and find you the top candidate. After a month of interviewing, you are presented with your two new hires: Well-connected Walter and Meritocracy Mary. What are the chances that these two are actually the best two hires, rather than the best hire and a mediocre hire?
> Sadly this won't be the wake up call that we need to bring back some sort of meritocracy to American society.
People "investing" into a cryptocoin because "value goes up" weren't being part of a meritocracy what so ever.
There was never any true value to FTT. Hell, there's barely any value to BTC or ETH as it is and its been 14 years of looking for a valid use case. The little value it has is in black market, and perpetuating fraudsters like SBF.
Sitting around with $100,000, doing nothing, and hoping to get $200,000 or more later isn't really a meritocracy at all.
> Crypto isn't the only one, lots of easy-money beneficiaries will come unglued.
I hope so. The past 10 years have been absurd IMO. I am of the opinion that returning the Fed Rate back to "more than zero" has begun to unravel a lot of these "money goes up" schemes.
Now that money actually costs money to borrow (up from 0% to 3.75%), you can't just keep borrowing for infinite amounts of time and hoping for the best. You actually have to be doing something substantial with the money: building factories or buying servers or using R&D funds to hire programmers to make new things.
"Line goes up therefore I buy" is one of the _LEAST_ "meritocracy" things I've ever seen in my life. Be it crappy stock from some companies, or cryptocoin.
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I want cryptocoins to return to the days about solving financial problems in new innovative ways. Can we go back to talking about how to use 3-out-of-5 bitcoin wallets to implement new protocols of exchange and/or escrow? When did we become so focused on "number goes up" and "inflation hedge" and "have fun staying poor" ??
When the damn coin can do something that physical money can't do, and when people build businesses on top of that trick, that's when we move forward as a society. Not just this weird hype-fest, buying out of stadiums (Miami Stadium / others), or buying out Superbowl ads.
I’ve never been a proponent of crypto, but my mostly outsider take is that speculators have pretty much buried any hidden potential if it exists due to greed. My sense is the public is sick of crypto and does not trust it.
Crypto holders are moving their crypto off of exchanges, not selling. The majority of sellers are speculators. The fast buck they were expecting hasn't materialized. They will be back when the space matures further, and more uniformed but well connected tradFi hustlers and VCs show up, hoping to replicate their success bullshitting the public. Meanwhile, those who understand the benefits of cryptocurrencies will carry on.
> I want cryptocoins to return to the days about solving financial problems in new innovative ways.
What problems other than "how to sell drugs to suburban teenager online", "how to blackmail companies", and "how to run giant global ponzi schemes" has crypto actually solved in its 13 years of existence?
13 years after the invention of the WWW, there were almost a billion users, and it was increasingly transforming the world. If any of these crypto/blockchain ideas were actually useful, they would have been widely adopted by now for more than just criminal activity. The reality is that it's an interesting idea, but it's utterly useless for any worthwhile use cases.
ARPANET was started in the 60's. I'd call the WWW more of a killer app than a disruptive technology.
Crypto does have to compete with alternatives that are protected and funded by the govt itself. And the main problem is the slow transaction processing as I understand it. Still not technologically competitive for big systems.
Public companies sell products that people actually pay money to use.
You can literally look at the Top line audited Revenue.
Can companies be overvalued? absolutely, just like how it can be massively undervalued (e.g META)
crypto, gold, art are asset classes that don't produce anything. So, you have to find other suckers to pay higher. But all three is based on scarcity. So, it is a supply/demand philosophy (vs cash generating assets like Bonds, Stocks, Real Estate). At least BTC/ETH/Art/Gold has natural supply limits, so the only unknown is demand. How do you induce demand? By telling stories about the asset class.
Art lends itself to natural storytellling. What about Gold and Bitcoin? The charlatans and hucksters and persuaders quickly figured out that "hating government" is universal and scales very easily. So peddling Gold/Silver became easy in the name of government and Gold performed the role of this anti-government asset class for quite a long period.
The initial internet adapters, Gen-Xers also leveraged internet (zerohedge, infowars, dredge report) to amplify anti-government/elite hate and peddle gold. This worked pretty much till 2012.
But, 2012 onwards Millennials started to take control of the internet narrative and buying Gold wasn't easy on the internet. So, they latched on to this new anti-government asset class, BTC.
The era of influencers and social media accelerated Crypto story-telling culminating in peak viral story telling in 2020/21 due to the pandemic (combined with unprecedented free money both for the rich and poor).
Cryptocurrencies are here to stay, thanks to it scalable narrative about anti-government with 8 Billion Total Addressable Market.
However, BTC maximalists should be wary about BTC as the one-true asset class. As wealth concentrates among the 0.1% of BTC holders, and poor environmental impact story around BTC, newer generation may revolt and rally around another poor-man cryptocurrency (like Dogecoin or something else).
In case of normal companies there's concrete real-world value being created.
The system goes wrong when they lie about that value or business model (fundamentals) to some degree (sometimes crossing the border of legality), wanting inflated valuations, and because unscrupulous investors want just that they pile on and support the bluff.
But in this case we're talking about cases where there's never even intended to be any such value.
He owns a large stake of FTX, which turned out to be worth zero, and he owns a large state of Alameda Research, which turned out to be worth zero as well.
He has some other assets, but according to reports, he also has a lot of debt.
His real net worth could easily be negative. That is lower than that homeless guy living under the bridge.
That's an important clarification, yeah. However, SBF did seem to receive $1.8 Billion in funding[^1]. Obviously that's an order of magnitude lower, but still an enormous sum and worth investigating in the autopsy.
Issue isn’t that he got billions in investment. He didn’t raise money from public markets so he stole money from the rich who had the means to actually due diligence but never did. Still blows my mind that he was caught playing league of legends on a pitch call and Sequoia still invested money in him. That was a clear view into his maturity level and seriousness. Would you hire someone who was gaming during the interview? If I was an LP, I would be asking a lot of questions and demanding accountability.
The biggest issue is that he stole money from his customers. Not people who had the means to due real diligence.
Exactly, the distinction is the good 'ol days, when there were only 3 news channels so there was no way to cover all the specific cases of non-meritocracy going on, and today, where there are many ways to communicate the long tail of all these cases.
> Sadly this won't be the wake up call that we need to bring back some sort of meritocracy to American society.
Genuine question: are we 100% sure that this society was ever meritocratic? How would we measure `meritocracy` so that we can compare year-to-year and decade-to-decade?
Of course not. It’s impossible. Take the presidency. Let’s say a very meritocratic person gets elected. There would be a hundred equally meritorious people who do not hold that office. Same for many things.
Meritocracy is a measure and some sort of idealized concept used for comparisons.
that's a utopian vision. we don't need a perfect meritocracy. majority of parents would do anything to put their kids ahead of others. i would help people I know and have relationships with first. it doesn't work out all the time.
> Sadly this won't be the wake up call that we need to bring back some sort of meritocracy to American society.
Please someone define meritocracy and describe how that will save us.
Here is a definition I googled: "a ruling or influential class of educated or skilled people."
SBF seems to fulfill the requirements. He went to MIT and studied physics and was a quant at Jane street (He was literally born on Stanford Campus to two Stanford professors). Logic being that if you score high on tests and go to a good school then you are up for the task. There are even papers that state that the higher your IQ the more moral you are. If you work yourself to death than you have earned the merit (he even claims to have slept in his office). He is even a vegan and a committed altruist. You could not get much better on paper.
All of these criminals have merit. Liz Truss and Boris Johnson all read at Oxford. The supreme court of the US are mostly from Yale and Harvard. Trump went to UPenn. Many of the people scamming us today work really long hours and have gone to really good schools.
The institutional investors should have put some people of their collective choosing on the board. These people should have had (non-racy) financial backgrounds. (The board of Theranos, notoriously, contained `great and good' people, but not with the right backgrounds to scrutinise what was (not) going on.)
Why only the system? In every fraud there are thousands of people working in these same companies and afterwards we only hear "We didn't know anything.". The CEO takes a deal and everyone walks.
Based on an interview with SBF, he made a ton (billions?) early on in the crypto days by arbitraging BTC/USD exchanges (e.g. one exchange was selling BTC at $200 and another was selling BTC at $210, so he took the difference). It's easier to throw £16B at someone who had already built the algo that got them personally to, say, $1B (in a very short amount of time).
Not sure why this is downvoted, it's accurate. Sam made a lot of money in crypto from 2017 to 2019 before founding FTX. He also went to MIT, not Stanford, and I think is a good example of someone who had privilege (via being born into an upper middle class family to intelligent faculty parents) but still went through meritocratic routes.
I think he made a couple hundred million on this trade and half a billion moe in alameda when things were going well then took investment funds denominated in either coins or USD and invested those into FTX expansion and more levered long crypto pump and dumps and then took those proceeds and did more pump and dumps and direct investments in things like robin hood and other shitcoins.
I think most of their "market making" was probably using connections to do pump and dumps of various coins.
activities like this made huge gains but since the BTC peak a lot of the same activities have been burning a lot of capital and then you end up needing recapitalization
> Based on an interview with SBF, he made a ton (billions?) early on in the crypto days by arbitraging BTC/USD exchanges (e.g. one exchange was selling BTC at $200 and another was selling BTC at $210, so he took the difference).
If you interview me, I can tell you I made a ton of money selling used condoms to developing countries. It won't make it true.
We now know he has, how shall I say it, a complicated relationship with the truth.
Hopefully, an enterprising investigative reporter or two will spend some time researching the topic.
How do these magazines write glowing reviews of people like this Sam kid? I understand it is hard to do due diligence on entities that are purposefully opaque etc. But shouldn't these magazines question everything, isn't that the very definition of a journalist's job, before writing reviews (good or bad)? They did the same thing with Holmes. And many more examples.
Or do they just do some light work, like a 12 year old school boy does for his class presentation at the last minute, and turn in their stories and move on to the next story?
A lot of tech coverage is just fawning hagiography rather than societally useful critical journalism, and a lot of people involved in tech seem to prefer it that way judging by their public words and actions - "don't question me - I'm changing the world!" The decline in ad revenues for papers and lack of employment opportunities for serious journalists doesn't help.
There was a headline that made it to the top of HN just last week criticizing the fact that the NYT takes an overly critical viewpoint on tech. Most commenters seemed to agree. I’m not overly surprised, your take is the correct one: “how could you be critical, I’m providing so much value!”
The allegations against NYT are quite a bit worse than you're making them sound. Here are the original allegations:
> a few years ago the New York Times made a weird editorial decision with its tech coverage. Instead of covering the industry with a business press lens or a consumer lens they started covering it with a very tough investigative lens — highly oppositional at all times and occasionally unfair. Almost never curious about technology or in awe of progress and potential. This was a very deliberate top-down decision. They decided tech was a major power center that needed scrutiny and needed to be taken down a peg, and this style of coverage became very widespread and prominent in the industry.
> People might think Matt is overstating this but I literally heard it from NYT reporters at the time. There was a top-down decision that tech could not be covered positively, even when there was a true, newsworthy and positive story. I'd never heard anything like it.
Fawning hagiographies are one extreme of a spectrum. A top-down decision banning _any_ positive coverage is the opposite extreme. What journalists should do is look at the facts and then decide the tone of coverage, which will result in a mix of positive and negative coverage.
> There was a top-down decision that tech could not be covered positively, even when there was a true, newsworthy and positive story. I'd never heard anything like it.
Business shouldn't be about stories, it should be about products and services.
Journalists and editorial teams are skeptics by nature, of course they will be suspicious when they see people from SV run their mouth about politics and becoming "thought leaders".
Where are the supposedly negative pieces on Microsoft, Intel, nVidia or IBM? Nowhere to be seen because these companies and those who lead them have perfected the art of not talking about politics or any politics related matter.
Ok, so who wants to work with me on an old-school, question-everything, due-diligence, _real_ journalism newspaper. Just think, we could sell to the entire HN market!
Like a lot of frauds, the ‘crazy Eddie’ fraud is periodized into phases were first they tried to understate income (to avoid taxes) and then later overstate income (to increase the value of a public company) and then had to work harder and harder to hide the fraud until…
It’s only obvious to you because it exists. Someone had to invent the novel concept. Often the simplest innovations are not obvious until they exist and they’re often the most powerful.
Many frauds start out as a legitimate business or idea that simply gets taken too far through some combination of greed, loose morals, and overconfidence. Once the ball gets rolling, money begins pouring in, and a certain amount of power is obtained it becomes difficult to stop the train.
People will do just about anything they can to ensure the money and power continue indefinitely.
This is at the root of many frauds I've seen in recent decades. In other words, most of these frauds are actually Crimes of Opportunity.
Sounds like this is really an argument for transparency. If people could see what what going on with Krueger or SBF's shops, they wouldn't have invested in them.
The main problem is that transparency has been possible all along. All those investors _CHOSE_ to invest into opaque structures, rather than companies with open books / transparency.
Because people get wrapped up into cults of personality. And Silicon Valley has mastered the art of reality-distortion-fields.
Insightful quotes from the article I annotated to my hypothes.is :
> People will do just about anything they can to ensure the money and power continue indefinitely.
> When technology moves forward by leaps and bounds, as it did in the first part of the 20th century, people prefer betting on the future more than betting on the past.
From comments on this thread :
> Us plebeians get a rare view into how business success commonly happens (a network of people force it to happen).
So-called smart money strikes again. Thernaos, Nikola, WeWork and now FTX (I'm sure I'm missing many and there are some other less obvious ones like Carvana and Opendoor). Billions and billions of dollars were funneled into these obvious scams all while being cheered on by celebrity hedge funders (likes of Cramer, Mr. Clown...etc.) and yet there are zero consequences for anyone involved.
Holmes Will probably be in jail shortly, Milton was convicted of fraud last month and should be sentenced soon, SBF fallout is too new. There will be some consequences although maybe not equal to the fraud. Frauds looks so obvious in hind sight but not so in the moments.
Based on what I have read, I think Fried should be in prison... but I wouldnt be surprised some of the many he robbed arent trying to find him and take revenge...
I would also nominate financiers who enable him and the other mind games being played on society.
Empowering people good with math is not much different than empowering people good with religious screed. They’re still fallible meat bags.
We keep buying into ephemeral gibberish. When one of these smart people can themselves rewrite immutable laws of reality and literally move planet, I’ll be impressed. Reading a machines manual and making it do is not that impressive.
Someone like SBF is a "trusted" figure, and he just destroyed that trust between himself and all sorts of people. Everyone looks like a fool for touching SBF now, and they are going to be pissed.
Sequoia Capital is already erasing SBF from their webpage for example.
He has made huge political donations with the money he stole. But I don't think even that will protect him. He stole money from the wealthy and if there is anything that the American justice system does well, it is methodically going after and grinding to dust anyone who steals from the wealthy ruling class. Be it a Walmart shoplifter who stole hundreds, or a crypto scammer who stole billions.
And I think the political donations will actually have almost no beneficial impact now. Because he is going to be broke. They already have his donations and he is now tainted and likely broke going forward, so they have no reason to be loyal.
Sure, but that does not mean that the justice system is necessarily just in all cases. Consider the 2008 financial crisis, the punishment (or lack of) that was doled out, and all of the stories that human beings told to each other during that period.
Humans run on stories, and good storytellers who know how to wash each others backs rise to the top of the food chain.
> One of his closest colleagues said, “There was an odd air of greatness about Ivar. I think he could get people to do anything. They fell for him, they couldn’t resist his peculiar charm and magnetism.”
> Which brings us to Sam Bankman Fried
Sounds actually a lot more like Elon Musk. But I get the comparison - public companies are a lot more regulated and in the open now than back then so it's not a good place for this kind of fraud. Crypto on the other hand is.
Look, I don't get why we're still talking about this. There's no new information and it's just boring. HN is supposed to be about true intellectual curiosity, not just gawking at the latest dumpster fire.
Because crypto.com is melting down right now, and people want to understand why. We have to go back to SBF from last week to understand the fear that is seeping in over crypto.com.
The price can go to zero and people like this will still boast about the blockchain continuing to function. They're two different discussion topics: does the technology work, and is it actually worth anything?
The price can go very low and stable coins and DeFi protocols around those can still function exactly as they ever have. A well regulated stable coin will function like any other financial service the West is used to.
A money market fund is federally regulated to be 30% liquid per week.
Because of this, it is very difficult to build a MMF that has much better returns than your competitors. In particular, most MMFs are in-and-around 3.6% APY returns.
These crypto-coins are promising 6%, 10%, 18%, or 20% returns APY. Spoiler alert: they aren't being run like a well regulated MMF.
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BTW, a money market fund is a mutual fund with regulations such that 1 share in the MMF is equal to $1. They are the already legal stablecoins you've been looking for.
We can look at the performance of say, VMFXX, which has been $1.00000000 per share for the last 3 or 4 decades. Meanwhile, even the biggest Tether stablecoins floats to $0.998 or $1.001 regularly. Certainly doesn't show very much confidence in the scheme.
This 6% staking or whatever, it's not stable. Never has been, never will be. You can't offer a better rate than the risk free rate unless you are willing to take on risk.
People who want 1 fund == $1 get savings accounts and/or money market funds (depending on their risk tolerance. Savings Accounts are safer but earn less. MMFs have fewer regulations and can therefore offer slightly better rates but for that extra risk).
Anyone promising 7% returns is lying to you. That's far above what even the "riskier" MMFs offer.
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Anyway, USDC is just a really weird bond market, where you end up offering loans (which are called "stakes" for some reason) to shady companies at far below market rates (ex: CCC Debt was 10% APY to 16% APY if you bought it on the open market. But if its "Staking" with BlockFi, it only earns 7%). Instead of thinking if these companies would return their money back, people handed money over-and-over to these other companies and wondered why it didn't come back.
If you really want to lend money to shady companies, I suggest finding rated bonds (even junk bonds) and playing with that instead.
