Magic Beans? In This Economy?
Twitter is going just great
Matt Levine took a look at the FTX balance sheet today:
$16 billion of dollar liabilities and assets consisting mostly of some magic beans that you invented yourself and acquired for zero dollars? WHAT? Never mind the valuation of the beans; where did the money go? What happened to the $16 billion? Spending $5 billion of customer money on Serum would have been horrible, but FTX didn’t do that, and couldn’t have, because there wasn’t $5 billion of Serum available to buy. FTX shot its customer money into some still-unexplained reaches of the astral plane and was like “well we do have $5 billion of this Serum token we made up, that’s something?” No it isn’t!
If you want to understand what happened to FTX, and by extension what the last couple years of “innovation” in crypto finance has been about, this is a good Money Stuff to read. My extremely condensed summary is: FTX’s value was mostly denominated in numbers like “$8,000,000,000” and “$2,187,876,172” which Sam Bankman-Fried just made up and wrote down in a spreadsheet. That’s not a complete description of the mechanism used to make up the numbers, but it is a full accounting of the real economic value created. The reason for making up those spreadsheet numbers was to attract and then steal customer deposits of actual money. Levine again:
If you try to calculate the equity of a balance sheet with an entry for HIDDEN POORLY INTERNALLY LABELED ACCOUNT, Microsoft Clippy will appear before you in the flesh, bloodshot and staggering, with a knife in his little paper-clip hand, saying “just what do you think you’re doing Dave?” You cannot apply ordinary arithmetic to numbers in a cell labeled “HIDDEN POORLY INTERNALLY LABELED ACCOUNT.” The result of adding or subtracting those numbers with ordinary numbers is not a number; it is prison.
The conclusion Matt can’t quite avoid is that FTX was “in the confidence business,” although “business” isn’t usually the word that follows “confidence” in this context. FTX’s value was mostly made of “confidence in FTX” in the form of digital beanies which SBF and his Stanford polycule used to convince suckers to give them money for the “fiat@” account (contents: “$8,000,000,000,” whereabouts: currently unknown). But were FTX a Bahamian penthouse full of isolated bad actors? Bloomberg’s Suvashree Ghosh and Sidhartha Shukla report:
Binance Holdings’ major crypto token holdings include $74.7 billion worth of coins, of which around 40% are in its branded stablecoin and native coin, according to data compiled by Nansen based on information from the world’s largest digital-asset exchange.
Now that FTX is dead, Binance is about ten times the size of the new second-biggest crypto exchange, and almost half its alleged value is in the form of self-created magic beans of the exact same type we’re all aghast that FTX tried to claim as assets, because crypto is a fractal house of cards where each individual card is itself a house of cards, and so on forever.
Now everyone is on Crypto.com deathwatch, and you can tell that’s about to collapse because the CEO is saying everything is just fine. There are rumors that last week’s 320,000 ETH “transaction error” is, in effect, the smaller exchanges passing around one pile of ETH so they can each take a quick snapshot of reserves and appear solvent—a 21st century update of mine salting.
Maybe it will be a long, grinding decline where every few months another trading pool admits it has nothing in the vault, and another crop of retail investors are left holding the bag, or maybe it will be a Chicxulub-style extinction event where Tether collapses and the whole crypto ecosystem goes bankrupt all at once. But however it happens, it is by now extremely clear that crypto is a pure scam and it will all collapse. Thanksgiving is coming up, so please tell the normies in your life to cash out before it’s too late.
And speaking of long grinding decline: Elon Musk is fully in his “Slim Pickens in Dr. Strangelove” era, gleefully waving his big stupid hat around while he rides Twitter toward a still-distant but ballistically predetermined crater. The Times tech reporting polycule of Kate Conger, Mike Isaac, Ryan Mac and Tiffany Hsu did a good Friday roundup of the previouslies.
Liz called it “the most expensive forum drama of all time,” Farhad reversed his own rosier predictions and admitted that “Elon Musk Has No Idea What He’s Doing at Twitter,” Lydia looked outside the hermetic chamber of media Twitter to describe what the idea of free global communication will lose when Twitter dies.
And I say “when Twitter dies” because it doesn’t seem like there’s much question anymore. Platformer’s Zoë Schiffer reported that the code is frozen subject to direct Elon approval only, and the big thirsty loser himself spent today losing a debate about the Twitter code to one of his own Android engineers (who he fired via tweet) and announcing that he was going to start playing “what does this button do?” with the backend:
One of the first things he turned off was apparently the service that sends out two-factor sign-in codes.
In Conclusion, Twitter is Going Just Great:
Inspired by Molly White’s legendary Web3 is Going Just Great (and created using her open source timeline generator) the magical Tabs Discord spawned a functioning ad-hoc web development company this weekend which spun up Twitter Is Going Just Great, so bookmark that if you want to keep up with the Twitter disaster in close to real-time. They’re also taking submissions via this form and Tweeting @t_i_g_g until our beloved hellsite finally subsides, hissing and bubbling, into the cold depths of the North Atlantic.
I know I talk constantly about how good the Tabs Discord is but somehow I’m still underselling it? I had nothing to do with this Twitter timeline project, they just made a thread and started building it together. I am routinely amazed by the range of expertise in there, and all you have to do to join us is subscribe.
Today in Crabs:
Today in Beef:
“What is this, a television for ants?” All Is Not Ok in Octopolis. Elizabeth Weil on “How to Live in a Catastrophe.” Gallagher died, and Ryan Broderick dug up this good Vulture story from 2015 on how much he sucked, for today’s. Here's a 105 page Google doc museum of Emoji, ASCII, and Text Meme Templates, collected by Nathan Allebach. I hate this so much:
Finally Heather Havrilesky wrapped up all of the themes of the weekend into one characteristically unexpected essay on the value of froth.
And if you think about it long enough — if you really meditate on how you, too, deserve to be flanked by a gaggle of sycophants — you might start to wonder how anyone puts their pants on in the morning without them.
And why should they? Why should anyone be forced to muddle through life without a glass office half full of yes men? How inhumane is it that we expect people to get through eight hours of work, five days a week, without a glass conference room, half empty of recently laid-off ass men?
Today’s Song: Yves Tumor, “God is a Circle”
Please follow me on T̷w̵i̴t̴t̷e̸r̸.
Please f̷͇̂o̴̻̕l̵̫̀ḻ̶̓ȏ̷̖ẁ̶͙ me.
Please f̴̥̣̈o̶̘̞̎l̴͎̾̽l̴̩̆ͅō̷̦͝w̸̢̱̄͝ ̸̧̉ḿ̷̧̆e̵͈̥͊ ̶͚͐͑ḇ̶̦̊͠e̷̱̿h̸͕̃ͅì̴̘͔n̶͖̍ͅd̶͖̣̒ ̴̹̙̈́t̷̬͇͗̊h̴͉̰̋̎e̶̮͒̌ ̶̙̳̅̋w̷͖̾ả̶̳̚l̶̦̏̀ḷ̷̏͐.̵̖̆̍
P̴̝̜̈́̐l̷͚̙̬̊́̃ê̵̪̥̮̌ḁ̷̓̂͑ͅͅs̴̥̩̈́͜ế̵̻̺͚ ̴̮̺͎͐̓̀h̵͙̭̼̑e̸̛͇l̴͔͙̬͛̽̈́p̸̥̀ ̸̨͑̌̂m̵̞͊e̸̛͖̦̼̅̆ ̶̡̺̎͐Í̸͍̠͂ ̷̣̜̚d̵̪͋o̸̦̍͌̏n̸̼͎͂͠'̴̟̥̊͆t̵̹̽͘ ̶̱̿̾k̷͎̺͉͒̅n̴̞̓̓̌o̴̞̙̦̔͂͝ẁ̶̫̣͜ ̸̠̥̓̐w̶̱͋͊h̷̻̩̿ͅẽ̴͍͖̋r̸̳̜̄͛e̶̤͙̎̐ͅ ̶̢̝͐Í̴̤͓̅͐ ̷̺͕̯͂ä̶͙̬̕m̵̡̕.̷̥͒
Yes, Substack has menchies now. They’re so thirsty to replace Twitter, lmao.