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FTX’s Downfall and Crypto’s Bitcoin Betrayal

 

Joshua Hendrickson

Think, Nov. 21, 2022

“The modern crypto industry, however, doesn’t necessarily share the same vision that motivated the creation of Bitcoin. These new projects don’t set out to solve the practical problems that motivated the cypherpunks, but actually just treat blockchain like another thing for the tech industry to tinker with.”

 

In late 2008, the release of the Bitcoin white paper introduced the world to cryptocurrency. In the years since, an entire industry colloquially known as crypto has emerged. Within this industry, people are constantly creating what they claim is the next, better version of Bitcoin. A number of companies have also been created to serve as cryptocurrency exchanges, where people can buy and sell cryptocurrency, giving customers access to these assets and protocols.

Much of the crypto industry has deviated from the principles that were critical to the development of Bitcoin itself.

Bitcoin was a genuine technological innovation. But much of the crypto industry has deviated from the principles that were critical to the development of Bitcoin itself. As the stunning collapse of cryptocurrency exchange FTX highlights, the crypto industry is filled with scamsPonzi schemes and bad actors. As a result, it has become increasingly clear that Bitcoin must be understood as something outside this crypto industry.

The creation of Bitcoin was not a random discovery, but rather the product of decades of discussion and development by a group of people known as the cypherpunks. This was an eclectic group of individuals concerned with issues of privacy in the digital age, and the way the digital world requires accounting ledgers to keep an electronic record of transactions.

Cypherpunks wanted an alternative: a private type of money. In thinking about how to design this type of money, cypherpunks studied commodity money and free banking. Along the way, there were a number of attempts to implement this idea, but they either never got off the ground or ultimately failed.

To introduce money with the characteristics that the cypherpunks desired would require something that was resistant to censorship. Creation of a new form of money would also have to deal with the incentives of the issuer, since someone who can issue their own money could potentially manipulate the supply to benefit themselves at the expense of others.

Bitcoin solved both of these problems. Anyone can download the Bitcoin software and operate a node on the network. The decentralized network maintains a digital ledger called a blockchain that keeps track of balances of the cryptocurrency known as bitcoin. ...SOURCE



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