Going Infinite: The Rise and Fall of a New Tycoon

by Michael Lewis

This was the very beginning of Nishad’s financial education: there were laws that, in theory, governed money; and then there was what people actually did with money. “That’s where I learned what the law is,” said Nishad. “The law is what happens, not what is written.”

late October 2008, someone calling himself Satoshi Nakamoto—and who to this day, incredibly, has kept his identity a secret—published a paper that introduced the idea of Bitcoin.

bitcoin was an “electronic coin”; it existed on a public ledger called a “proof-of-work chain”; each time it was transferred from one person to another, its authenticity was verified by programmers, who added the transaction to the public ledger; those programmers, who would eventually become known as bitcoin “miners,”

If Bitcoin had its way, banks and governments would no longer control money.

Crypto was like the friend you’d made only because you shared an enemy.

As it turned out, the people who set out to eliminate financial intermediaries simply created some new ones of their own, including, by early 2019, two hundred fifty-four crypto exchanges.

The whole thing was odd: these people joined together by their fear of trust erected a parallel financial system that required more trust from its users than did the traditional financial system.

In traditional finance, founded on principles of trust, no one really had to trust anyone. In crypto finance, founded on a principle of mistrust, people trusted total strangers with vast sums of money.

At the start he’d thought that hiring only effective altruists created a special advantage—everyone in the company would trust each other’s motives, and so no one would need to waste time and energy doing the many things that people did to create trust among themselves. They could skip the one-on-one meetings, and the eye contact and the firm handshakes and, above all, the arguments about who deserved to be paid how much, and why. As it turned out, they couldn’t.

In 2018, trading $40 million in capital, Alameda Research had generated $30 million in profits. Their effective altruist investors took half, leaving behind $15 million. Five million of that was lost to payroll and severance for the departing crowd; another $5 million was lost to expenses. On the remaining $5 million they’d paid taxes, and so, after all was said and done, they’d donated to effective altruist causes just $1.5 million. It wasn’t anything like enough, in Sam’s view. “We needed to get a lot more capital, or way cheaper capital, or make much higher returns,”

The design that FTX (Gary) had come up with solved the problem, in an elegant way. It monitored customers’ positions not by the day but by the second. The instant any customer’s trade went into the red, it was liquidated. This of course was unpleasant for the customers whose positions went into the red. But it promised to do away with socialized losses, which had plagued crypto exchanges from the beginning. The new exchange’s losses would never need to be socialized, because the exchange would never have losses.

Crypto exchanges and token creators who wanted to sell to Americans insisted that these tokens weren’t securities but more like, say, Starbucks Rewards points.

“The smartest minds of our generation are either buying or selling stocks or predicting if you’ll click on an ad,” he said. “This is the tragedy of our generation.”