FTX Isn't The Problem. WE Are.

Trust is an exercise of optics & assumptions, an imperfect, but reasonable heuristic.

It’s been a hell of a week across the space.

If you somehow missed it - FTX, formerly the 2nd largest crypto exchange in the world, imploded in astounding fashion. This shocking failure wasn’t due to unsustainable yields, algorithmic stable coins, or any other exotic “crypto” shenanigans.

FTX collapsed because of a scheme that’s been around for thousands of years - fractional reserve lending.

Long story short, FTX entangled client funds with those of their trading firm Alameda Research. Why would a prudent fiduciary ever do such a thing?

THESE FOLK GREEDY!

More plainly stated, Alameda was aggressive - with their spending, with their marketing & with their risk appetite. By intermingling funds, Bankman-Fried’s legion of quants would have more money to chase after that oh so elusive alpha. As physics & sound economics would have it, turns out the fractional reserve business model doesn’t work so well in bear markets & is downright terminal if clients suddenly decide to withdraw their funds in good ‘ol bank run fashion.

In true eclipse fashion, the perfect storm ensued on Tuesday November 8th as FTX struggled to cover user withdrawals, ultimately halting service all together. Actually, that’s not entirely accurate. They halted withdrawals but left deposits open. Again, Why would a prudent fiduciary ever do such a thing? Every penny matters when a company previously valued north of $30B is struggling to find a buyer willing to pay $1 to assume control of the company’s balance sheet. After all, $8B is quite the IOU.

There’s plenty of nuance I’m glossing over, so feel free to DYOR into the matter should you crave further details, but I’ll cut to the chase.

A SOVEREIGN FUTURE REQUIRES A TRANSPARENT PRESENT

Trust is an exercise of optics & assumptions, an imperfect, but reasonable heuristic. Not everything can be clearly proven in a way befitting unwavering trust or confidence. Nevertheless, certain matters, like financial transactions or digital provenance, are uniquely qualified to reject trust models of the past, assuming form as irrefutable fact when linked, living & recorded on-chain. For everything else, trust is built through a consistent track record of honest communication.

FTX may be the latest travesty of truth, but I assure you it won’t be the last. I encourage us to use this moment to reflect more deeply about the fundamental nature of trust, who we trust & why we trust them.

In this spirit, I’ve put together a disclosure statement for myself & Native Assets.

This has been on the roadmap for too long, recent events made this a top priority. In pursuit of best practices I forked the Bankless disclosure format, adapting it for Native Assets. This is a living document & will be updated regularly to reflect material digital asset holdings, sponsorships, paid advisory roles, formal employment, or other paid work that relates to the sector. Though you will begin seeing sponsorships & partnerships, I will never bias or sway my genuine opinion in exchange for payment or favors. This is all an exercise in openness.

For all my peers in the space - I urge you to provide disclosures as well. The more influence you have, the more critical the exercise.

95% of us here have good intentions, work incredibly hard & consistently give our all to this community. That said, not everyone is as forthright as they could or should be. The problem is never making money, its in unjustly leveraging your reputation, status or connections to do so in a dishonest or manipulative manner.

Until we begin holding ourselves to a higher standard, innocent people will continue to suffer the consequences as we risk total & complete self-destruction.

If we want better, DO better.

Peace + blessings,
Sae’Von

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