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Super Easy Ways To Handle Your Extra FTX
Many questions have been raised about the future of blockchain and non-fungible tokens (NFTs) after the collapse of cryptocurrency exchange FTX. As a market many people were already skeptical about, this scandal certainly does not inspire faith in the future of NFTs. Despite FTX's failure, the collapse of one exchange does not necessarily mean that blockchain and NFT technology is doomed as a whole.

What is Alameda Research exactly?
Alameda Research was an quantitative cryptocurrency trading company, founded in September 2017 by Tara Mac Aulay and Sam Bankman-Fried. Mac Auley stated on Twitter that she quit the company due to concerns over risk management, business ethics, and that she had left in April 2018.

Two years after Alameda was founded, Bankman-Fried launched FTX as a crypto exchange completely independent of Alameda (or so we thought). Although https://tinyurl.com/y344w2pw were established as two separate entities, Alameda played a huge role in the growth of FTX, acting as FTX's main market maker.

Bankman-Fried, Alameda's CEO in 2019, resigned to support his claim that FTX was "wholly different" from Alameda. As it turns out, the two entities were more closely tied than Bankman-Fried claimed them to be. Not only did executives at Alameda and FTX often work out of the same Bahamian penthouse, but FTX CEO Bankman-Fried and Alameda CEO Caroline Ellison were rumored to have romantic ties. The relationship between the companies doesn't end there.


What is FTX?
FTX Trading Ltd. was a cryptocurrency exchange that was founded by Sam Bankman Fried and Gary Wang in April 2019. Prior to its bankruptcy in November of 2022, the exchange had over 1 million users and was the third-largest crypto exchange by volume. FTX is an abbreviation for "Futures Exchange".


What is FTT?
FTT is the native token of FTX. FTT tokens were created to provide a way for traders to save on trading fees and reward loyal users. FTT holders received a better referral rate, daily ERC20/ETH withdrawals of up to 1000 and a greater probability of airdrops. The exchange token also has a central collateral pool, which means that the collateral pool will rise in value when markets become volatile. This reduces transaction fees and allows users to trade easily.


The benefits provided by FTT tokens seem appealing at first glance; however, had the token been more difficult or expensive to use as collateral, the risk to customer funds may have been reduced.

Who is the FTX CEO?
Sam Bankman-Fried was the CEO of FTX before the company collapsed. Prior to starting his companies, Bankman-Fried graduated from the Massachusetts Institute of Technology (MIT) and worked at Jane Street Capital, a proprietary trading firm. Right before he founded Alameda, he worked at the Centre for Effective Altruism as the Director of Development.

A Short Timeline for FTX
May 2019
FTX is founded by Sam Bankman-Fried and his roommate, Gary Wang.

November 2019,
Changpeng Zhao from Binance buys a 20% stake at FTX for around $100 million.

August 2020
FTX acquires cryptocurrency portfolio tracking app, Blockfolio, for $150 million.

July 2021
FTX raises $900 Million from more than 60 investors at an $18 Billion valuation. Bankman-Fried purchases Zhao's stake for approximately 2 billion.

September 2021
FTX moves its headquarters from Hong Kong to the Bahamas.

January 2022
FTX announces its $2 billion venture, FTX ventures, raising $400 million in Series C funding at a $32 billion valuation that month.

February 2022
FTX.US announce that the company would soon begin offering stock trading to its US customers.

July 2022
FTX finalized a deal giving it the option to buy digital asset lender, BlockFi, for about $240 million.

September 2022
FTX.US won the auction for digital assets of Voyager Digital, a bankrupt crypto brokerage, for $1.42 billion. (Following the bankruptcy of FTX in December of 2022, rival exchange Binance won the bid to buy the assets of Voyager for approximately $1 billion)

October 2022
Bloomberg reports on the close relationship between Almeda and FTX.

November 2022
CoinDesk publishes a report that further exposes Alameda's and FTX’s close ties. FTX then files for bankruptcy in days that follow.

What is the FTX scandal?
The collapse of FTX began on November 2 when the crypto news site, CoinDesk, reported that Alameda Research, held a position valued at $5 billion in FTT. Alameda's investment fund was also in FTT tokens. This raises concerns about Bankman-Frieds' unreported leverage and solvency.

Binance, a rival exchange, sold all its FTT tokens to satisfy these concerns. Customers followed their lead and FTX was hit with a massive bank run that cost billions of dollars. FTX's liquidity crisis prompted Binance to make a non-binding deal with Binance to buy FTX. However, Binance did not proceed with the purchase after considering FTX’s mishandling of funds as well as their pending investigation.

The Securities Commission of the Bahamas froze the assets of FTX Digital Markets Limited, one of FTX's subsidiaries. FTX Japan then suspended operations. FTX Australia was placed under administration.

FTX filed for bankruptcy on November 11th, after it was found that they did not have sufficient assets to satisfy customer demand. Shortly after, FTX reported an alleged hack worth close to $500 million in FTT was moved out of FTX accounts. Bankman-Fried blamed these transfers on an internal mislabeling issue, however, there is no clear financial reporting from the crypto exchange on why those funds were mishandled.

Bankman-Fried's balance sheets were not audited. This meant that there was no reliable record of the company's funds. This lack of tracing is obvious as FTX funneled customer funds from FTX into Almeda - a reported value of $10 billion with approximately $1-2 million not accounted for. Despite Bankman-Fried's claims that FTX and Alameda Research were independent firms and to protect funds entrusted to the exchange, the false marketing of the exchange and misuse of customer funds appear to be a conscious effort.

CoinDesk's report raised concerns within the cryptocurrency industry about Bankman-Fried companies' leverage, solvency, and risk. This led to the collapse of the exchange, a 10-day down spiral, and Bankman-Fried being arrested.

What is FTX Founder Bankman-Fried Being Charged with?

Bankman-Fried was arrested on December 12 following a lawsuit against FTX alleging that Bankman-Fried's company was a fraudulent cryptocurrency scheme designed to take advantage of inexperienced investors across the U.S., including several celebrities and professional athletes. He was later released on a bond of $250 million to await his trial. After an investigation conducted by United States Securities and Exchange Commission and Commodity Futures Trading Commission, he is being charged with the following 8 crimes:

Two counts of conspiracy to commit wire fraud
Two counts of wire fraud
Conspiracy to commit money laundering
Conspiracy to commit commodities fraud
Conspiracy to commit securities fraud
Conspiracy to defraud America and commit campaign finance violations
The ex-CEO pleaded not guilty to his federal fraud charges on January 3, 2023.

What does the FTX scandal have to do with NFT and blockchain?
It's easy to wonder about the future of other cryptocurrency exchanges, NFTs, and blockchain as the dust settles over the recent FTX flop. It is easy to conclude that the collapse of the crypto exchange was due to the newer technology of blockchain and NFTs. However, the root of FTX's collapse was not a problem with the security and reliability of the blockchain and NFTs, but rather a problem of deceit, improper financial reporting, and the misuse of customer funds. In reality, the core of blockchain and NFTs is the safety, security, and proof of authenticity they provide.

While it's difficult to predict exactly what will happen, here are a few predictions on where things may be headed:

Blockchain technology will continue to mature and evolve, with a greater focus on scalability and user experience.
The increasing popularity of blockchain technology in the financial sector has created scalability problems. As a result, several scalability issues have occurred such as increased transaction time, network transaction fees, and electricity usage (enough to power the entire country of Switzerland). These issues can make systems slow and more costly for users. Focusing on addressing these issues will be important for improving the overall user experience and tackling sustainability issues.

NFTs will continue to gain traction as a way to authenticate and monetize digital assets, including art, music, and collectibles.
Despite the fact that the collapse and bankruptcy of FTX have cast doubt on the financial industry, it appears this is a temporary setback. The future still looks promising for NFTs as a whole. Here are a couple of predictions of anticipated areas for NFT growth:

Gaming and metaverse: Expected to increase dramatically in video games and in the metaverse, NFTs. In-game assets (e.g. Play to Earn, Move to Earn) will elevate to new levels and their associated NFTs may be used to prove the credibility of a gamer or as a means to access virtual events. Outside the gaming experience, metaverse events such as concerts, conferences, and parties will be accessed through digital avatars, assets, tickets, and memorabilia in the form of an NFT.
Ticketing: Events like concerts and sporting events will increasingly use NFTs in the form of the event ticket to admit attendees into the event and provide dynamic, in-event offers and promotions.
Music - More musicians may use NFTs to promote their talents, interact with fans and earn royalties from their NFTs.
The Digital Twin: The idea of a physical item's "digital twin" will increase over the next year. To improve sustainability, traceability, customer engagement, and experiences, companies will equip their products using NFC technology.
Like any industry, growth isn't always linear. The market for NFTs may experience ups and downs but overall has a bright future as more people become aware of and interested in this exciting new technology.

What are your thoughts? What's your take on the future of blockchain and NFTs? Share your thoughts in the comments below!



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