Commentary: Why I’m still not taking crypto seriously

Yield-farming – a rather complex practice that essentially offers investors a chance to turn their crypto into more crypto, by borrowing money from the customers, giving them a “governance token” in exchange, and farming out this crypto into other coins and “DeFi” projects offering high yields – has long raised eyebrows.

That’s not just because of the unusually high returns it promises, but also due to concerns that retail investors don’t really understand it and thus are not fully aware of the risks involved.

You might think therefore that Bankman-Fried, whose platform offers this very thing, might try to dress it up as a grown-up financial product.

Not so much. Bankman-Fried, using the analogy of a box to describe one of these yield-farming platforms, explained its value proposition thus: “This is a valuable box as demonstrated by all the money that people have apparently decided should be in the box. And who are we to say that they’re wrong about that?”

He then described how all this becomes a kind of self-fulfilling prophecy, because once investors start feeling bullish about it, the token becomes more valuable and they “go and pour another US$300 million in the box . . . and then it goes to infinity. And then everyone makes money.”

Bloomberg’s Matt Levine, clearly rather stunned, pointed out that Bankman-Fried seems to be saying something along the lines of: “Well, I’m in the Ponzi business, and it’s pretty good.”


Bankman-Fried’s comments have been widely mocked, and they are indeed risible, but what is perhaps funnier is that what he is describing can be applied to the rest of crypto, too. I have long compared crypto to a Ponzi scheme, though there are some differences, such as the lack of a central administrator.

Crypto, like Bankman-Fried’s box, has no inherent value; it is worth simply what everyone has decided that it’s worth. And just like this box, which as the FTX founder explains can be created “in like five minutes with an Internet connection”, crypto tokens can be made just as easily.