How FTX Collapsed ??

It’s been a mind-boggling week in the crypto world and we’re gonna tell you all about it in this newsletter.

Buckle up for a ride or better still get a friend to join you on this one.

Now the stories of the week!

IN THIS ISSUE:

• How FTX collapsed
• ?Google is working with Solana
• 0

?THE BIG IDEA

How FTX collapsed

Within 48 hours FTX, the second largest crypto exchange in the world went from 100 to?nearlyzero real quick.

Wait, how did we get here?

First, some history lesson.?In November 2017, Sam Bankman-Fried (SBF) founded the hedge fund Alameda Research, and two years later he founded FTX, a crypto exchange.

FTX, which became the more popular entity of the two benefited from the 2021 bull run, rising to become the second largest exchange in the world, overtaking the likes of Coinbase, Kraken and Gemini.

Uhun…

On November 2, CoinDesk?reported?that Alameda’s balance sheet was disproportionately filled with FTT tokens, dropping a hint that FTX and Alameda Research were more closely intertwined than many had thought. According to CoinDesk, $5.8 billion of Alameda’s total assets ($14.6 billion) were held in illiquid FTT collateral that had a market cap of ~$3.35 billion.

Now the issue with this is that FTT tokens aren’t an independent asset like fiat currency (Dollars, Pounds, Rand) or another crypto, they were invented by FTX, a sister company to Alameda.

On November 6, Binance CEO CZ, who was displeased with SBF’s stand on crypto regulation of crypto, announced on Twitter that he’ll sell off the $2.1 billion worth of FTT Binance had. Binance was an early investor in FTX, but when FTX grew fast and the two exchanges became competitors, they parted ways with Binance being given back its stake in $2.1 billion worth of FTT.

This move by CZ coupled with rumours going around caused a panic. Sellers were selling FTT but nobody wanted to buy the token, causing the price of FTT to spiral down.

The price of FTT crashed drastically from $24 to $2 as at the time of writing this newsletter. A year ago FTT tokens were worth $60.

And…

At the brink of collapse, SBF reached out to CZ to help out. Binance initially agreed to buy FTX (with the option to pull out if it didn’t), but later pulled out. Apparently, the damage was more than Binance could take on.

So in a?nutshell, here’s what went wrong.

FTX is a crypto exchange, not a bank. People buy and sell cryptocurrencies, and many people store them on FTX for ease of use. FTX loaned $10 billion out of $16 billion of those cryptocurrency deposited on its exchange to its hedge fund, Alameda, which in turn made bets using those customer funds and ended up losing about $8 billion.

The word got out, people came knocking for their funds in droves. There wasn’t enough to go around.

What’s next??FTX, FTX group (130 affiliated companies), and Alameda Research have all begun filing for bankruptcy. Samuel Bankman-Fried has stepped down as CEO.

Regulators are looking into the situation and asking questions.

QUIZ

What does a bridge mean?

(Answer at the end)

Inside Music NFTs

Google has a lot in the works for the web3 space.

Alphabet (Google’s parent)?participated?in four funding rounds in blockchain firms between September 2021 and June 2022, including crypto conglomerate Digital Currency Group and Dapper Labs, the Web3 startup behind NBA Top Shot.

In October, the global tech giant?partnered?with Coinbase to receive payments for cloud services in crypto.

Now it’s working with Solana.

What’s this about?

Google will?soon allow?Solana validators to use its cloud service to validate transactions, with the aim to make it easier and safer for people and node runners and programmers to use Solana.

Backstory:?Last month, Google launched?Blockchain Node Engine, a service that will help power blockchain nodes, which are the underlying infrastructure of blockchain networks. Notably, Ethereum already works with the Ethereum network.

Breaking it down

A blockchain is a network of computers (nodes) executing and validating transactions. Normally, participants of any blockchain have to set up their own hardware (computer) to send and received information on the blockchain (nodes) but now Google is offering its cloud service for storage and activities.

Think of it this way, instead of crypto enthusiasts worrying about what computer to buy and how to run a node, Google is offering its cloud computing services to make it easier.

For the Blockchain to be truly decentralised, it needs to be easier for people to come on board. Google’s move could be a game changer that could also spur Amazon and Microsoft to get into this space.

This announcement serves as a wake up call for smaller players such as Alchemy, Infura and Blockdaemon that already offer this service; there's a new kid on the block.

NUMBERS SPEAK

0

A reminder that the value of crypto projects can go from 100 to 0 in short while.?

Do your own research before investing in crypto projects.

Word of the Week

A bridge is a protocol allowing separate blockchains to interact with one another, enabling the transfer of data, tokens, and other information between systems.

?Web3 Jobs:

• Senior BD Rep Focused Industry?(Onsite)?– Amazon
• Director of Marketing?(Remote)?– Co : Create
• Security Engineer Crypto Custody?(Onsite)?– Further Ventures
• Marketing Manager Web3?(Onsite)?– Binance
• For more jobs refer to?our jobs board page.

What We’re Keeping an Eye On:

• Crypto’s future may be divided, not dead
• Crypto’s FTX Moment Shows Danger of Centralized Finance With No Central Bank