Number Go Up: Inside Crypto's Wild Rise and Staggering Fall

by Zeke Faux

Other coins would adopt different authentication systems that used far less electricity, but Bitcoiners opposed any change to Nakamoto’s mining system. There was no way to reduce mining’s energy use. The difficulty of winning the guessing game—the thing that incentivizes all this energy-intensive computer use—is what kept anyone from hacking the system. Some tried to use renewable sources, but as of 2023, about 85 percent of the electricity used for Bitcoin mining came from coal and natural-gas plants. By some estimates, Bitcoin mining consumed as much energy as the entire country of Argentina, population 46 million. If this all sounds insane to you: I know. I am with you.

It had been more than a decade since Bitcoin was invented. Crypto had become practically ubiquitous. In 2020, as crypto trading took off during the pandemic, Tether grew exponentially, selling 17 billion Tethers. The next year, it sold 57 billion. But regulators still weren’t sure what to do about it, or the rest of the industry. Crypto was growing wildly, and no one was enforcing any of the usual safeguards.

In the previous two years, Bankman-Fried had become one of Washington’s biggest political donors. He gave $5 million to a committee supporting Joe Biden in the 2020 presidential election, and FTX and its executives spread around at least $90 million in campaign contributions, making them one of the biggest donors for the 2022 midterm elections. Most went to Democrats, but FTX executives also gave at least $20 million to Republicans. One in three members of Congress received donations.

THE NUMBERS ACTUALLY made no sense. Lapina told me that in the early days of the craze, a player could buy a set of Axies for about 5,000 pesos and earn around 400 pesos’ worth of potions a day. In U.S. dollars, that amounts to a $91 investment with a daily return of around $7.25. Most players would send the potions to a more sophisticated intermediary, like Art Art, who would swap them for Tether and then trade that for cash on a crypto exchange, but even with a bite taken out by a middleman, a player would be in the black after just a few weeks—and keep earning. The returns didn’t strike the Filipinos I talked to as unreasonable. But a more sophisticated investor would have realized the daily rate of return was 8 percent—way, way too good to be true. At that rate, with earnings continually reinvested for ten months, Lapina and everyone else who bought a single set of Axies would be trillionaires. The limits of the global money supply meant that the game’s economy was bound to collapse long before Lapina and his Cabanatuan friends turned into history’s richest men. The exact mechanics of the quests and the potions were irrelevant. Smooth Love Potions had no use other than to breed more creatures within the game. The only thing that kept the Axie economy afloat was new players buying in.

It reminded me of a maxim called the “bullshit asymmetry principle,” coined by an Italian programmer. He was describing the challenge of debunking falsehoods in the internet age. “The amount of energy needed to refute bullshit is an order of magnitude bigger than to produce it,” the programmer, Alberto Brandolini, wrote in 2013.

In walked a haughty man with a long, scraggly beard, a potbelly, and mismatched socks, one of them with a Pac-Man design. He was an employee of FTX who’d stuck around to help Bankman-Fried try to find an investor to rescue the exchange. I threw out an easy question. “Why are you still here?” I asked. He started off by saying he wanted to help FTX’s customers. Then, unprompted, he told me that he thought there wasn’t much risk Bankman-Fried would ever get in trouble. “I firmly believe once somebody becomes a certain level of rich, they’re never poor again,” he said. “They don’t go to jail. Nothing bad happens to them.” I tried to keep a straight face as I imagined him telling that to the congressmen and prosecutors investigating FTX. His supercilious attitude and slovenly appearance reminded me of the disagreeable know-it-all Comic Book Guy from The Simpsons. His answer was so bad, it felt almost unfair to ask him tough questions. I gave him a second chance to say something nice about Bankman-Fried. “Are there specific things that make you think Sam is honest?” I asked. “Oh, I didn’t say he was honest,” the man said. “Was there a separation between Alameda and FTX?” I asked. “If you were in my position, would you answer that?” he said. By the time the supporter had finished digging the hole as deep as he could, the sun had gone down

He was so proud of FTX’s margining system that he’d been lobbying regulators for it to be used on U.S. exchanges instead of traditional safeguards. Bankman-Fried himself had said that exchanges should never extend credit to a fund and put other customers’ assets at risk. He wrote on Twitter that the idea an exchange would even have that discretion was “scary.” I read him the tweets and asked: “Isn’t that, like, exactly what you did, right around that time?” “Yeah, I guess that’s kind of fair,” he said. Then he seemed to claim that this was evidence the rules he was lobbying for were a good idea. “I think this is one of the things that would have stopped.” “You had a rule on your platform. You didn’t follow it,” I said.