I really like Bloomberg’s “Odd Lots” podcast. The hosts are quite good (Tracy and Joe) and they consistently bring on impressive guests (readers might remember the Reserve Asset 3.0 piece inspired by Zoltan Pozsar on an “Odd Lots” podcast).
Well, on this Monday’s episode, “Odd Lots” had Sam Bankman-Fried (SBF). He is probably best known for his exceptional hair, but he also founded crypto exchange FTX. He ranks among crypto’s richest and, given he studied physics at MIT, probably one of its classically brightest (whatever that means). On the podcast, he compared crypto “yield farming” to a “box” that lets you take out more money than you put into it.
That quote hit me like a ton of bricks, but then he tacked on a swipe at venture capital’s investment approach that irked me. His view on venture capital is shared by many, but that view has been muddied by the introduction of crypto. I’m not suggesting SBF is wrong necessarily. What I am suggesting is that crypto venture capital … is … just … not really … venture capital.
That (and maybe more …) below.
– George Kaloudis
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I’m a bitcoiner. According to the internet purist’s set of rules, that means that I need to shun altcoins and “crypto” altogether. But honestly, that’s boring.
I’m not boring, so I pay attention to the hellspawn landscape of “crypto this, NFT that and blockchain everything” that Bitcoin inspired. Part of that means that I listen whenever SBF speaks. I want to zoom in on two specific things he talked about in the podcast mentioned in the introduction: 1) The Box and 2) venture capital.
On the podcast, Matt Levine (every newsletter writer’s hero) asked SBF to give “an intuitive understanding of yield farming.”
Sam responded with:
Ok … a weirdly simple example using a somewhat cynical tone: The Box seems kind of meaningless, a technologically enabled piggy bank.
He went on:
Then the yield farming kicks in, and The Box starts giving out tokens as interest payments to people who have put tokens in The Box.
Uh … who turned the heat up in here? This is a scathing take on yield farming that you’d only expect from its harshest critics. That it came out of the mouth of one of crypto’s richest was surprising. SBF basically said that yield farming consisted of:
Step 1: Put money in The Box.
Step 2: Wait.
Step 3: ???
Step 4: Profit.
I have nothing more to add, because I think these quotes largely stand on their own. I wanted to write about these quotes to highlight that individuals should exercise caution when it comes to deciding on partaking in yield farming or not. Your yield might just be grounded in nothing except The Box. Which can be fine, as long as you understand that and are OK with it.