Conversation

SBF
@SBF_FTX
Replying to
@SBF_FTX
10) It's a really cute slight of hand, and I don't think it was originally intentional. But framings matter. And if you put a hyperinflating coin in an AMM, each round of yield starts by increasing its market cap. Yield printer go brrrrrrrrr
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SBF
@SBF_FTX
11) And this all seems ridiculous! Except. Why is BTC the most valuable coin, and not BCH, or ETH, or DOT? Is it because of its unique design? Maybe. But really, BTC is worth $220B because it trades at $12k. And it trades at $12k because we all agree it does.
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SBF
@SBF_FTX
12) I mean, also, at this point BTC has built in advantages: apps that support it, and buy-in from some institutions, etc. But if we all woke up one day feeling like maybe BTC was worth $1k, and someone all exchanges cleared all orderbooks....
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SBF
@SBF_FTX
13) ....then bids would be around $900 and offers around $1100. And so BTC would be worth $1k. And maybe we all decided that BCH took its place, or XTZ, who knows. Coins are what we agree they are.
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SBF
@SBF_FTX
14) And in some sense, so are blockchains. I mean that's what a consensus is. Normally this is pretty straightforward. For BTC, you take the longest valid chain, and that's real. And if you mine another block you mine on that chain.
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SBF
@SBF_FTX
15) But what if, one day, all the miners woke up and said "eh you know what fuck the last 100 blocks, those were stupid". So all of their machines turn back 100 blocks, and start mining from there. Blockchains are what we think they are.
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SBF
@SBF_FTX
16) As are so many things in life. Some things have direct physical value. To some extent--to a very real extent--everything else is what we all make of it. Most value in the world is born from and sustained by our collective imagination.
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SBF
@SBF_FTX
17) And so we return to our yield farm, piles of Y dropped on top of each other. What is Y worth? Well, let's say it was trading at $1. Then comes the yield, and there are twice as many of it. What's it worth now? Well, you look at the AMM, and... looks like about $1.
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SBF
@SBF_FTX
18) And it's not just you, it's everyone. Everyone still sees $1. And maybe it "should" be $0.50 now. But it's not like $1 was any more blessed before than it is now. And just because a token was worth something doesn't constrain what it can be now.
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SBF
@SBF_FTX
19) Sure, hyperinflation, whatever. I looked at the pool and the pool told me $1. Even
@coingecko
agreed! So $1 it is, and the market cap of Y doubles. Yield go brrrrrrrr
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SBF
@SBF_FTX
Replying to
@SBF_FTX
21) But we can hold them, and as long as we all have strong hands we stay rich. But the world has no more bread, or houses, than it did before. We got more of them, at the expense of everyone who agrees that Y is still worth $1 but doesn't have any.
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SBF
@SBF_FTX
22) And what Y shows is that some of our deep beliefs about what has value were never more than an implicit agreement never to doubt it too much. Because when you do, sometimes, everything is exposed.
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SBF
@SBF_FTX
23) So anyway, a few days ago a master chef cooked us all up a platter of pure yield. And in doing so, he taught us a few lessons about ourselves.
Image
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SBF
@SBF_FTX
24) First, he taught us that if we all believe a coin is worth a billion dollars, then maybe it is, at least for a day. But he taught us something else, too. See we divide the world up, into vegetables and blue chip projects.
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SBF
@SBF_FTX
25) Vegetables are empty, and projects are in it for the long term. But maybe sometimes those gatekeepers of our ecosystem were made out of our collective imagination. And when some yield shows up, and our belief flickers from one pool to another...
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xbtuzd
@xbtuzd
Replying to
@SBF_FTX
and
@SBF_Alameda
You still have to realize those gains If Y is only traded in the AMM pool, you need more and more farmers so your sells balance their buys for LP tokens I guess a CEX listing of Y is needed for most early farmers to exit ahead