The Big Tech Stories of 2022: The Crypto Winter

Now is the winter of our crypto coin, made even worse by Sam Bankman freed, and all the doubts that lowered upon n f T s now cross the blockchain entire are laid. Now are our wallets, but home for moths are sub bredits filled with bros calling hoddle our stern skeptics, doth say, I told e thus, dreadful partners,

asking where the hell is our money? Okay, my apologies to you and to a certain master Shakespeare, But honestly, I doubt I'm ever going to have the opportunity to play Richard the third, And so that's the best I

will ever hope for. And yes, this episode we are going to cover some of the big stories that revolved around cryptocurrency in two and there is a lot to go over, from crypto in general declining and value over the year, to some cryptocurrencies making a big important change in how they operate, to the infamous collapse of the ft X crypto exchange, to related stuff like blockchain and web three hype. You don't very much web three hype right now? Huh, Well, we'll talk about why, but let's

get to it now. First up, I think it's important to do a quick refresher on cryptocurrency. It's a term that is used a lot often without very much explanation as to what goes into cryptocurrency. People just think, oh, it's a digital form of money, and so I think we need to have a little bit of groundwork laid now. The whole trend began thanks to a white paper that proposed a blockchain, a shared ledger, and a digital currency

called bitcoin. Now, unlike other currencies, bitcoin wouldn't be dependent upon a country's government or some central financial institution. It would be a decentralized digital currency. Participants in the system could even earn rewards by helping to verify bitcoin transactions. So each transaction would join others and they would form a block, and each block would be laid in front of the last block in a chain of blocks. Thus the block chain. The values represented within a block would

depend upon all the blocks that came before it. Now, this would mean that no one would be able to go back to earlier transactions and alter one of them, you know, like in an effort to say return some bitcoins they had they had spent. Let's say that you had five bitcoins, you spent four of them, and then later on you thought, I need more money. So what if I just go in and erase that transaction and magically give myself back the four bitcoins that I had spent.

That way, I could double spend the same bitcoins. Well, if you did that, if you went back into the blockchain and you changed that transaction, if you found a way to do it, that would actually change all the values of the blocks that came after it. And that means everyone would know that you try to be very very naughty. Now, there are a few different ways to verify transactions and to award cryptocurrency units. The way Bitcoin does it is called proof of work. Now we're going

to be super high level with this. But in this method, computers in the system are essentially competing against each other in order to solve a math problem. Or really it's about guessing the right number, and it should take about ten minutes to get the right answer on average. But if computers start to take longer to answer it because the problems are really hard, well, the system actually adjusts to make those problems easier to get closer to that

ten minute benchmark. If it starts taking less time. If systems are solving the problem earlier, well, then the system makes the problems harder to solve. Now, a downside to this approach is that as the currency increases in value, there's a greater incentive for people to try and earn the cryptocurrency by verifying these transactions. This is called mining.

So these people start pouring more money into their computer systems so that they have more computer power to dedicate to this, and they get an edge on all the other competitors in the system. If the value keeps going up, this becomes an escalating war between the various mining operations.

So with Bitcoin, the value at the beginning of two was nearly forty eight thousand dollars per bitcoin, and each time you verified a block of transactions, which again was every ten minutes, you would get six point to five bitcoins as a reward if you were the system that got the problem right first, so that would be worth around three hundred thousand dollars at the beginning of two, and you would have a chance to do it all

over again in just ten minutes. So if you managed to be the winning computer system for every single block in a in a single day, you would end up solving around one hundred forty four blocks at that point, that would be nine d bitcoins, which would be worth around forty three million, two hundred thousand dollars in US dollars at the beginning of January two. That's a huge amount of money right now. It would not be likely

for you to be able to do that. Chances are other systems would be solving some of these throughout the day, but even if you only needed a few, that's still a huge amount of money. So it was no wonder that there were entire massive networks dedicated to bitcoin mining. Folks were taking over decommissioned power plants and then firing them back up in order to provide the electricity needed to power these customized mining systems that were designed to

beat out all the other competition. Bitcoin mining was creating a strain on power grids. It was actually responsible for more electricity usage than some countries create in an entire year,

which is just wild. But that's just the basics, right, That's for the basics for bitcoin, and we will talk about an alternative to proof of work later on in this episode, but first, let's talk about an early setback that happened for cryptocurrency sort of, and that would be when Meta a k a. Facebook because that's what it was called when it first came up with this plan ended up ditching its plans for its own cryptocurrency. So

some backstory. Back in two thousand nineteen, Facebook, which was not yet known as Meta because it adopted that name in late announced that it was developing a cryptocurrency that at that time was called liber up Now. Instantly, governments and regulators around the world started to express concern that such an influential tech company was essentially looking into ways

to print its own money. Even some crypto enthusiasts got a little worried as Facebook's approach didn't really follow that decentralized path that coins like bitcoin purported to follow, like, you would have a centralized authority in the form of Facebook or the association that Facebook would create. Now, Facebook did not intend to be the soul core of Libra. Instead, Facebook created a consortium and association, the Libra Association, a group of companies that would serve as sort of the

custodians of this digital currency. And unlike coins such as bitcoin, the average person would not be involved in verifying blocks of transactions. You wouldn't have these groups of digital miners building massive computer systems trying to beat each other out to verify. Instead, the consortium would handle it. So you

had this against centralized authority in that sense. Now, Facebook ended up creating a division called Calibra, and it was dedicated to creating digital wallets that Facebook users would be able to link to their Facebook accounts, and other members of the consortium would also be able to make Libra compatible digital wallets. But Facebook had a bad reputation already in two thousand nineteen. It would only get worse in

and it hasn't exactly gotten better this year. So this was a company known for not doing enough to keep illegal content off its own platform. Governments, particularly the US government, were understandably concerned that a company that had shown such reluctance or incompetence take your pick when dealing with harmful

content now wanted to create its own currency. There were multiple hearings to hold Facebook accountable to following laws and creating safety measures that financial institutions have to have, right, so they're essentially saying, hey, we require all the official currency institutions in this country to follow these rules. You will be expected to do the same. So now we have to start making sure that you have the systems in place to do that now. Towards the end of

Libra got a name change. It changed to d M, partly to distance itself from Libra because Facebook's reputation was getting uglier by the day. Facebook would follow this same strategy in late one, that's when it changed its corporate name to Meta, and then by early two the project was pretty much dead in the water. There were a lot of internal discussions and disagreements with the direction of

the currency company. After company dropped out of the Libra association, and the opposing regulation authorities really had killed all momentum. So without fanfare, Facebook dissolved the liber Association and it sold off the i P connected to Libra slash d M for about a d eighty million dollars, and Facebook's attempt at making a cryptocurrency would fade into history. All right, Now, let's talk about bitcoins declining value. So back in, Bitcoin

hits some truly monumental highs. It flirted with nearly seventy thousand dollars per bitcoin at one point, but by late January two it had dipped into the thirty five thousand dollar territory, so it had lost nearly half its value in about half a year. Now, the coin rallied a bit in the spring of two early in the spring, but by April things started to slope downhill, and the

currency gradually followed the performance of the stock market. Now, I have long maintained that bitcoin and other cryptocurrencies aren't really currencies. They're really more like commodities or investments, at least that's how most people treat them. So it isn't a big surprise that as people started to lose faith in the stock market and that that started to suffer,

that we saw something similar happen in the cryptocurrency world. Now, today the value of bitcoin is around sixteen eight hundred dollars as a record. This that's still a lot of money, you know. It still means that if you mind a block on the Bitcoin blockchain, you would be awarded the equivalent of a hundred five thousand dollars worth of bitcoin.

That's nothing to sneeze at. That's a lot of money, but it is not the massive amount that you can make back when bitcoin was at its height in one let alone at early two And that has meant that mining operations have really scaled back because the money coming

in from mining has declined, but the cost of operations hasn't. Right, So as the money you bring in decreases but your costs stay the same, it gets harder and harder to cover those costs and eventually get to a point where it could actually cost you more money to run your computer systems. Then you will earn out of mining even if you are really successful. So for the moment, the runaway race to have the biggest, most powerful computer network on the blockchain has taken a little break. You would

actually lose your shirt if you tried to follow that philosophy. Now, also I should add there were some truly wild predictions for what Bitcoin's value was going to be by the end of this year before you know, all of two happened, And to be fair, a lot did happen that people just didn't foresee. For example, Russia invading Ukraine. We're gonna talk about that in a future episode in this series. But one of the effects that had was a massive

economic impact throughout the entire world. Well, no one foresaw that when they were making uh predictions. And keep in mind in bitcoin really did look like it was going to the moon. Well one venture capitalist, Tim Draper, famous venture capitalist, previously predicted that bitcoin was going to reach an astounding two hundred fifty thousand dollars per coin by the end of this year. A quarter of a million

dollars per coin. Now, obviously that didn't happen. Instead, like I said, bitcoins hovering below seventeen thousand dollars as I record this. But even as late as October of two, analysts were guessing that was gonna end the year around twenty two thousand dollars per coin. Unless we see some pretty dramatic surges and value in the next ten days or so, that's just not gonna happen. Now, I'm not a financial expert, so it's possible it will happen, but I will not be surpri eyes if it's closer to

between sixteen to eighteen thousand dollars per coin. Even if it dropped a little below sixteen, I wouldn't be super surprised. Now, Draper, for what it's worth, says that he now thinks that bitcoin will hit two d fifty dollars. Is just going to take until the middle of next year for that to happen. But then there are also doomsday cults that when the world continues to exist past it's predicted to doomsday deadline, they just moved the deadline back a bit.

This feels kind of similar to that to me. But then again, Draper is a very very rich man and I am not. So maybe my doubts are unfounded and I just can't see the way he can. We'll have to wait until June and next year, I will say. There are other investors like Mark Mobius who have had a much more cynical outlook and think that bitcoin could fall as low as ten thousand dollars a pop by

next year. Also, Mark Mobius is a great name Okay, we've got a lot more to cover about cryptocurrencies in two, but before we do that, let's take a quick break. We're back now. Some cryptocurrencies are linked to fiat currency or other real world assets. So the idea is that these coins will maintain a more consistent value because they are tied to things that have other ties that guarantee

their consistency, and we call these stable coins. There are other cryptocurrencies that aren't linked to such things, and they aren't linked to each other, at least not directly. However, when one coin, especially a really influential one, starts to go down in value, then you start to see other

coins follow suit. This is pretty common, so when Bitcoin goes down, often you'll see other coins that are not directly tied to Bitcoin go down to Now, maybe investors are getting cold feet and they're losing confidence overall in cryptocurrency. Maybe it's more of a reflection of the overall economy and its movement. It's probably a combination of tons of factors, but it means that two was a year where you'd see various crypto values decrease, though most didn't have nearly

as far to fall as Bitcoin did. Let's talk about a coin that made a long awaited change this year, and I'm talking about Ethereum. Now, Ethereum is one of the more popular and well known cryptocurrencies that doesn't happen to be Bitcoin. It has always felt a bit more accessible to the common investor. Back in early twenty while bitcoins were worth like seven thousand dollars a pop, ethereum

was trading closer to a hundred thirty dollars. But by the end of twenty ethereum was trading it around six hundred dollars each and then in early twenty twenty one it went up twice as high and it just kept on climbing for a good long while. Now you may have heard that cryptocurrency mining had a really big impact on things like the graphics card market, and that is

true now for Bitcoin. The value of the currency had grown so much that someone running even a network of computers with screaming fast graphics cards just would not be able to compete because other miners with deeper pockets had moved on to purpose built circuits such as applications specific integrated circuits or a s i C. But for cryptocurrencies that weren't up to these astronomic values that Bitcoin was enjoying, Miners were relying on computers with just powerful graphics processors

because that still made economic sense, and so Ethereum miners were scooping up the best graphics cards really quickly, and then they would either sell older ones or you know, used ones at really high prices on the secondary market, and gamers were faced with very few options when they

were trying to build out their gaming rigs. They couldn't easily get new cards because miners or people who were selling the cards to miners were gobbling them up, or else they would have to pay a ridiculous premium on top of the already high cost of these cards, like sometimes well over twice as much as what they were originally going to be sold at. But Ethereum was preparing

to switch how it awarded cryptocurrency. So it had been operating on a proof of work system just like Bitcoin, although it was it worked much faster than bitcoins ten minutes per block, but it was instead going to make a shift to something called proof of steak. So with a proof of steak that's s T a k E. With that kind of system, participants have to put up a share of their own cryptocurrency holdings, that is the steak.

The system decides which stakeholder gets awarded new units of cryptocurrency at the end of each block's verification, so this system does not require the same massive amounts of computer work that a proof of work system requires, and as a consequence, we saw GPUs become more available and less

expensive because miners didn't need them anymore. So it took a little bit of time, but gradually things settled down, and a lot of former ethereum miners also had to figure out if they were going to switch to mining some other proof of work cryptocurrency, potentially at a much lower value, which could mean that you know, your costs eat into any profits you make, or if they were just going to sell off their old gear. So a

lot of them chose to sell stuff off. Now, if you are in the market for a GPU, personally, I would recommend against buying a used mining rig. You might get a top card from the previous generation of cards, like the already eighty generation, but it will have been used hard and these cards can and do burnout over time. Plus they have moving parts like a lot of these cards have their own cooling fans built into them, and

those are also going to get worn down. So personally, I would suggest you don't go for a used GPU, especially if you know it was used in a mining rig, because you probably want a card that's gonna last you for a good long while, and those just aren't guaranteed

to do that anyway. The proof of Steak branch of Ethereum actually launched a couple of years ago, but it was kind of almost like an a beta program, and it wasn't until this September September two that the proof of work branch of Ethereum would merge with the proof of Steak branch and the whole thing would become proof of Steak. So again, this event is called the merge capital m So the GPU stuff is fairly recent news.

It's been pretty recent that you could actually get hold of GPUs and pretty much at the manufactured suggested retail price, which is a nice change of pace. Now. At its peak, Etherory was worth more than four thousand, six hundred dollars a coin. Now that was in November of Today, Ethereum's value is closer to twelve hundred dollars per coin, so it's still nearly ten times more valuable than it was the beginning of So I don't want to make it

sound like Ethereum is like crashing and burning. It's still way better than it was just two years ago, but like Bitcoin and so many other cryptocurrencies, and has lost a ton of value over the last year. And again, that loss of value is a very complex issue. It is tempting for me to say that people are generally losing faith in cryptocurrency, and since the currency depends largely upon people believing and then behaving as if it in fact has value, well if they stopped believing, the value

goes away. But honestly, that's just not true, or at least it's not the whole truth. Yes, many cryptocurrencies are based on little more than how investors and miners and participants are treating it, but external economic factors are also at play, and ignoring that just means you're being dishonest. Now, I think we started to get a feel for how rough two was really going to be for cryptocurrencies back

in mid spring of this year. One early indication that things were headed south was the collapse of a crypto firm called Three Arrows Capital. So this company was based out of Singapore at least until very recently when it moved to Dubai before it imploded. And Three Arrows Capital a k A. Three a C was a hedge fund specializing an investment in cryptocurrencies, and it had been around for a decade, so this was not some brand new company.

It had, you know, been around for ten years. But by the spring of two the company had a billion dollars in assets. That's impressive, but it also had more than three billion dollars in debts. Oh. Now, as cryptocurrencies began to decline in value, three a C was starting to feel the pinch, but that pinch became crushing when

a couple of crypto coins collapsed. Those coins were Terra U S D that's T E R R A so Terra USD, which was shortened to just U S T as its acronym or initialism, and then there was Luna, and both of these called the Terra blockchain their home. So Terra USD was supposed to be a stable coin tied to the U S dollar through a very complicated relationship with Luna, but in May two that complicated relationship unraveled rapidly, and so the U S T coin, the

became unpegged to the US dollar. It no longer was tied to the dollars value, and its value collapsed to just ten cents per coin. The value of Luna dropped to almost nothing. We're talking fractions of a penny, like point zero zero zero zero some sense. Well, Three Arrow Capital had unfortunately invested very heavily in Luna, so when suddenly all that value just went away, it tore the foundations out from underneath three A C. The company spiraled

into bankruptcy. The collapse of UST and Luna wiped out more than forty billion dollars in investor wealth. I think I've seen estimates between forty two and forty five billion dollars, and when your estimates have a range of three billion, things are bad now. It also tied off another stable coin going into a crisis. That one was d e I briefly got unpegged from the U. S dollar as well and plunged in value by thirty percent, which really

made things worse. And you can look at the U S T and Luna collapses as kind of the first domino to set off a chain reaction in the crypto world. In general, it caused three A C to implode, and three A C happened to owe a lot of money to a crypto lending company called Voyager Digital based on New Jersey. So three A C was taking loans from Voyager Digital in order to fund its various investments. So when all of that collapsed, Voyager Digital was left holding

the bag. So when three A C went under, it could not pay the money it owed to Voyager Digital, and it defaulted on the loan and Voyager Digital in turn was over extended, so it also began to spiral into bankruptcy. Now, the hope for Voyager was to get through bankruptcy, to manage its debts and its creditors, and to eventually get throw own a lifeline by a different crypto company. That company was drum roll please f t X. We will talk about f t X more in a

bit in this episode. So the U, S T and Luna collapse also undermined another crypto firm, another crypto lender in fact, called Celsius Network. The company also entered into bankruptcy in July of the bankruptcy courts were really busy with cryptocurrency in July of this past year, so in that bankruptcy process, there were some questions that were popping up about how Celsius had been run as a company.

In fact, we're seeing lots of questions about lots of crypto firms, because it turns out many of them were run at least incompetently, if not outright unethically or badly. So with Celsius, there have been allegations of fraud. There have been some issues about how some customers may have received preferential treatment over others, and the judge overseeing the bankruptcy case has had concerns and so assigned an examiner

to look into Celsius's operations. There was even a fear that the company was essentially operating as a Ponzi scheme, whereas my colleague Chuck Bryant would say, it's a Ponzi scheme. Well, in case you're not familiar with the term Ponzi scheme, it's an unfortunately common scam in which someone running a supposed business first gets a group of investors to pour money into whatever the venture is, and the nature of

the venture doesn't really matter, it's just smoke screen. So they get a first round of investments from people who think, you know, oh this sounds like a good idea, or I believe in this person or whatever, so they put their money into it. Then the scam artist starts looking for a second round of investors and convinces them to put money into the venture the supposed company. Then they use some of the money that's coming from the second round of investors to pay out some returns to the

first round of investors. So the first round of investors are given the implication that they are getting money on top of the investment they have made, so a lot of them will end up reinvesting into the company because they're like, oh, wow, it's working, I'm making money. I'm gonna put the money I made back into the company.

I'm gonna make even more money. So the scheme perpetuates, and the scam artist continues to try and get round after round of investment and then using the incoming money to give little payments out to the earlier investors in order to keep the scheme going. But the venture itself isn't actually generating revenue. It's not necessarily doing anything other than let the con artists run around and make money off of other people, like getting rich off other people's money.

The scheme is also not sustainable. It will ultimately get to a point where you cannot get enough investments frequently enough to pay out returns to earlier investors, and the whole thing will come crashing down. Anyways, generally not good news if a judge suspects that your crypto firm was

little more than a Ponzi scheme. The Celsias Network, for its part, has said it welcomes third party investigations, which is a good thing because it currently has a whole bunch of them from the bankruptcy court and securities regulators, and of course it's creditors. Okay, we're gonna take another quick break. When we come back, we will tackle the elephant in the crypto room f t X. But first

let's take this break. Okay, f t X, I have covered this several times recently, but you know that we're looking back on the year and this was a big story. So I also say this every single time I cover this, in case you haven't picked up on it. The crypto world in general loves acronyms and initialisms. This is like

extra true for the f t X story. But the short version of the story is that f t X, which is a crypto or was a cryptocurrency exchange, imploded in November of this year, and the ripples from that event are playing out across the cryptocurrency space, including the aforementioned Voyager Digital Lender, because the plan initially was for f t X to bail that company out. But we're going to dive into a tiny bit more detailed to

understand exactly what happened with this company. Okay, so the main person involved in this story is a guy named Sam Bankman Freed, whom the crypto world often refers to as SBF. But I'm going to call him Sam because otherwise, as we go on with the story, it's gonna start to sound like I'm intoxicated and trying to say the alphabet and I'm just getting it all wrong. So a few years back, Sam Co founds an investment company called Alameda Research, and this company, like three a C, made

its business in investing in various cryptocurrencies. So this company operates for a couple of years and then sam Co founds another company. This one is called ft X, and it is a cryptocurrency exchange now, and exchange is a business that exchanges currencies for other currencies. If you've ever traveled internationally, you may have used a traditional exchange where you convert some of your currency for whatever the local

currency is. So, for example, if you're from America and you go to the UK, you might visit an exchange to change out your U S dollars for British pounds. Or if you're an American and you go to Canada, you might exchange dollars for poutine. If you were to come to my home state of Georgia, our currency is coca cola, and let me tell you, it is very hard to hold onto your money when you've got a

pocket full of loose cocola. Jokes aside, Currency exchanges make their money by taking a little transaction fee or sometimes a not so little transaction fee, every time they're changing one form of currency into another for a customer. The ft X exchange also minted its own cryptocurrency called f t T, so if you wanted to, you could exchange your dollars, or your bitcoin, or your a theory um or whatever into f t T. In addition, customers could

store their wealth in f t X itself. Now, a lot of folks will tell you that the best thing to do with cryptocurrencies is not get involved. But for those who are not skeptics like myself, then they might say the best thing to do is to store your cryptocurrency in a digital wallet that's living on a machine that you have in your physical possession. That you store it on a device that you own. Now, the danger of that is if anything happens to that machine, then

your money is gone. It's kind of like a physical wallet in that respect. If you drop your wallet, chances are your money is a goner. Except for that one time where I did drop my wallet while I was walking to work, and a very nice person found the wallet and drove all the way to my house and returned my wallet to my wife, And that person is a saint. I don't know how many people like that are in the world, but I'm hoping that we see

more of them, because that's inspiring. Anyway. Some companies offer a kind of cloud based wallet, so instead of keeping your money on a physical machine that's in your possession, your money lives in an account with whatever crypto company this happens to be. So f t X had these accounts, and a lot of customers had wealth stored in f t X is coffers. Now, so far, there's not really a problem with any of this. Meanwhile, Sam gets a repute station for being kind of a philanthropic superbro in

the world of crypto. He donates to charities, He supports progressive political candidates. He helps bail out other crypto companies that are in trouble. He acts as a representative to talk with regulators about ways to responsibly regulate cryptocurrency. Over time, ft X establishes its headquarters in the Bahamas, which is not unusual. A lot of crypto companies look to establish themselves in places that have less regulatory oversight than say,

places like the United States. Fd X grows to become the second largest cryptocurrency exchange in the world. The largest one is a company called Binance, and it had been an early investor in f t X, but fd X had subsequently bought out finances investment with the aforementioned ft T cryptocurrency. So they're like, here's this currency we made,

we're paying you back thanks for the early investment. So Finance at the time was holding thousands and thousands of f t T coins, so that represented a ton of

wealth and now our stage is set. So in November, a cryptocurrency journal called coin Desk published an article that included a leaked balance sheet that showed Alimator Research, Sam's crypto investment company, had a very large source of ft T tokens coming in to help cover investments, and apparently what was happening was it was funneling ft T tokens from f t X. So the implication was that Alimaated Research was quote unquote borrowing money from f t X,

but fd X was not informing its customers its investors that this was happening. So this meant that f t X potentially would not have the money on hand to pay out someone if they wanted to withdraw all of their money that had been stored in f t X. That's a big no no. It's the kind of thing that can lead to a run on the bank, and if the bank cannot cover all the cash, things get real ugly, real fast. So Sam seemed to be robbing

Peter to pay Paul. He was taking customer money from f t X and using it to cover investments at Alimato. And while I'm saying Sam, really, I mean f t X, and you know Sam is not the only person involved in this. There's a whole group of people who were in charge of running f t X. Sam himself has argued multiple times that he was not aware of a lot of this. I don't know how true that is, but I'm using Sam kind of as a representative of

the company as a whole. Now. I'm sure that the hope was that the investments that Alimator Research was making would end up paying off big time, and that Alimated would thus be able to pay back f t X all that money and it borrowed, and then make profit off of the rest. But things unraveled pretty quickly after

this leaked balance sheet made the news. So in the wake of the report, Binance CEO Chung Peng Jao a K A c Z because again initialisms, he announced that Finance was going to sell off its massive vault of ft t coins. So remember it held those f t t coins because ft X had paid back Binance for its initial investment. Well, I'm sure you realize that if a market is suddenly flooded with any asset, the value

of that asset will go into decline. It's all supply and demand, right Like if suddenly there's way more supply than there is demand, and the value of that supply

goes down. So now you had all these f t X customers who were worried that their coins were going to be worthless, or at least worth less than they had been, and so there was effectively a run on the bank, and f t X, unable to cover this contingency due to you know, sending way too much money over to alimated research, which is what caused all this in the first place, went into free fall. Now arguably the killing blow for f t X came when c Z said that finance would bail out the company and

then one day later backed out of that deal. Now to be clear, there was nothing binding about that deal in the first place, so it's not like they did something illegal. But with no rescuer on the horizon, f

t X spiraled and crashed. Sam got the boot as CEO, and the company brought in John Jay Ray, the third to essentially oversee the dismantling and liquidation of f t X. Ray had previously overseen similar duties when he was called in to get as much value out of the company in Ron in the wake of its bankruptcy that's a

heck of a story on its own right. So literally, his job is to ring as much out of this collapsed company as he possibly can in order to return money to creditors and then investors as much of it as he can manage anyway. Sam meanwhile remained in the Bahamas, occasionally giving remote interviews where he said that there was no intent to cause harm, that he didn't know anything about any alleged wrongdoing, and even if he did know,

he didn't mean it, and so on. There were allegations that hundreds of millions of dollars had mysteriously vanished out of ftx's coffers immediately in the wake of the collapse, and there were a lot of uh theories online that perhaps Sam or one of his close friends had been behind all that. There were others that were saying maybe it was a hacker. There were a lot of questions. Over time, folks started looking at what Sam was saying, and they got all Shakespearean, you know, they said, the

crypto bro doth protest too much, methinks. And last week Bahamanian police arrested Sam on behalf of the United States, which has now charged Sam with multiple counts including money laundering and securities fraud, among some others, and as a record these episodes, the word is that Sam is preparing to be extradited to the United States in order to

stand trial. He was also supposed to appear before the US Senate to answer questions about the failure of f t X, but declined that invitation just before he got scooped up by the Pope po. Meanwhile, Finance is also the subject of multiple investigations. So remember Finances the largest cryptocurrency exchange in the world, it is also under a law of scrutiny. The company has been accused of processing ten billion dollars worth of illegal transactions just this year,

including stuff like money laundering. So in the wake of so many cryptocurrency companies collapsing, there's an understandable concern that the world largest cryptocurrency exchange could suffer the same fate. Ultimately, now, c Z has tried to reassure investors, investors, customers, regulators that there's nothing really to worry about, and that Finance even commissioned a third party to review Finances reserves to show that the exchange has a one to one reserve

representing all customer investments in the exchange. In other words, if every single customer wanted to withdraw their money from finance, finance would be able to cover it, except the report did not say that. In fact, it showed that finances reserves fall a little short of covering the wealth invested

in it. Not a lot short, not like f TX, but it's a little short, probably because finance also issues loans, So some of binances money is actually out in circulation and customer hands, and presumably will ultimately return to Binance as these customers pay it back with interest in the future. But even before all these crypto failures, regulators around the world we're already starting to scrutinize cryptocurrency more intensely in

the wake of collapse. After collapse, there is a new sense of urgency around the world, particularly as folks like John Jay Ray the Third proclaim that ft X experienced a quote complete failure of corporate controls end quote, suggesting that these crypto companies are operating like fly by night shady organizations that also happened to have access to hundreds

of millions of dollars worth of customer funds. There's a general perception that crypto is going to have to adjust to a world of increased regulation in the not too distant future, maybe next Sunday a d So that's a summary of some of the big stories that happened in crypto this year. Now I did mention n f t s and web three as well, so I should give

a super quick update on those ideas. So n f t s or non fungible tokens represents some sort of unique asset, a digital asset typically, and I've often equated n f t s as being kind of like a receipt for something, usually something digital. So it's not the thing itself, it's representation of ownership of that thing. So in January of two, n f t s were trading at a peak. The value of those trades was around seventeen billion dollars, but over the course of twenty twenty two,

trading dropped precipitously and then absolutely plummeted. It's down scent from the beginning of the year, according to Bloomberg, and that seventeen billion dollars of value is down to four hundred sixty six million. That's still a lot, but it's nothing close to what it was at the beginning of the year. A lot of folks became disenchanted with n f t s fairly early in twenty two, and it didn't help that there were plenty of opportunists who were

running n f T scams. They were taking the money and running really damaged the image of n f T s overall, like they were already overvalued in my opinion, but the scams definitely kind of showed the ugly side of this this world, and it was exacerbated by campaigns that hired influencers to hype up n f t s, some of which ended up being cash grabs and total scams. So even Justin Bieber hyped up and n f T without first disclosing that he actually had some ownership interest

in the venture itself. So if you can't trust Justin Bieber, who can you trust, baby Baby Baby. So n f T s have a damaged reputation at this point, as does crypto in general, and that brings us to Web three. So Web three is a really hazy, ill defined concept. Generally speaking, Web three proponents say the future web is going to be built on top of blockchain, and that it's going to be a decentralized approach to the web.

It'll free us from the current anchors holding down the web, these massive companies like Google and Amazon and Meta, Except that in reality such a web would still be centralized because it would really fall into the hands of whatever powerful entities had invested in those blockchains. So at best, you're really talking about a poorly defined infrastructure that has just switched out the names of who is the most influential, right like the names of change, But the situation is

still the same. Also, I should point out the original concept of the Internet was decentralized. It is a network of networks that doesn't have centralized power associated with it. Like they're trying to solve a problem that was solved just by the invention of the Internet. It's not really the Internet's fault that there were these massive companies that managed to consolidate power over the time that the Internet has been an action. So yeah, it's it's taking a

hammer to a problem that needs a screwdriver in my opinion. Anyway, toward the end of into the beginning of two, there

was this ton of hype around Web three. But since those ideas of Web three are also tightly connected to other blockchain concepts like cryptocurrency and n f t s, and because of the dramatic failure of those things, we three hype meisters have really suffered some major setbacks in the back half of now I'm not ready to say Web three is dead in the water, but i will say it's going to have to swim awful hard to avoid the riptide that's pulling at its feet, you know,

to torture a metaphor. Okay, that's it for this episode of looking back on the big Tech stories of two, the cryptocurrency edition. We will continue this tomorrow with other news stories, so stay tuned for that. We've got a lot more to cover before we finish out, and I am honestly really looking forward to and seeing what that brings. I don't know that it's going to be better. I'm not being that optimistic, but I'm certainly curious and I'm hopeful.

I would love to see things start to improve and have us learn lessons from the catastrophic failures that we've seen this past year. Remember, failure is an opportunity to learn, but we have to take the opportunity for it to work. That's it. I hope you are all doing well. I hope you are happy and healthy during this holiday season, and I'll talk to you again really soon. Tech Stuff

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