The Economist: How did CZ, SBF, Hayes and others become some of the most powerful in crypto?

The Hong Kong branch of the FTX cryptocurrency exchange is a meeting place between financial giants and young people. At 7:30 p.m., staff in shorts and t-shirts were still working overtime, returning from each desk with a screen. Alcohol, cardboard boxes and all kinds of trash were strewn everywhere, and guitars and tennis shoes were strewn all over the place. The food delivery drew the hungry, as well as traders and manufacturers against the wooden chessboard. in the trenchSam Bankman-Fried, founder of FTX, plays the role of the king of the club or Uncle Sam. When bitcoin prices soared, they were used to play poker in conflict rooms.

After two years of existence, FTX is today one of the most powerful companies in the crypto space. In October of this year, FTX raised $ 420 million from a number of key investors, including the world's largest management firm BlackRock and venture capital conglomerate Sequoia. This allowed FTX to increase the value of Sequoia Capital from $ 18 billion to $ 25 billion in the three months following last fiscal year.

After signing a multi-million dollar sponsorship deal this year, the shining name of EBUA, home of the Miami Heat basketball team, and appearing in the Super Bowl industry. In addition, the FTX will soon be named in the Mercedes F1 group. Negotiated by its competitors, FTX is currently in the top 4 of the exchanges. Sam Bankman-Fried is a well-known SBF in the industry with an estimated net worth of $ 22 billion. Moreover, he was only 29 years old.

Visit: Kaiko, the economist

Since the start of 2020, the total market value of the global cryptocurrency has increased 12-fold to $ 2.3 trillion (through mid-December 2021). That made Changpeng Zhao, 44, the eldest of four, Binance, the biggest cryptocurrency exchange, not flashy. Three years ago, Changpeng Zhao, nicknamed CZ, replaced Arthur Hayes (co-founder of BitMex).

Coinbase is the only name and regulator of exchanges in the United States, and its CEO, Brian Armstrong, is shy and not laughing. he hopes,As a longtime player and often "open and honest" trader, he can inspire traders to trade in supervised and cautious offshore exchanges.

These four companies have made millions of dollars in wealth in just a few years and have made huge profits. In the modern financial economy of day-to-day lending, spending, and savings, there is a strong voice from the middle class like banks, payment companies, and real estate regulators. But today, personal money is often used for speculative purposes, forcing traders to change the world for the king, providing professionals with the tools and equipment to trade and wipe out the strong middle class.

They initially believed that governance was not a threat, but as local authorities began to change, most organizations would leave the area to "take comfort". Obviously, some outsiders question their integrity and others make their success on time rather than a vision of the company.

Believers have praised their talents in a business that is not very strong, but some do not believe how long they will last. People know very little about their own lives, beliefs, and ambitions.

The Economist interviewed our founders and insiders to find out how he could be used to become the strongest person in the cryptocurrency space and they could step down after they leave. Hayes is awaiting trial for a denial of money laundering in the United States. He also pleaded not guilty.

Their parents are both college graduates and have backgrounds and excelled in school.SBF, the son of a Stanford University law professor, said he was "very good" at math. CZ's father became a geophysics instructor to evade Chinese law, and CZ finished in the top 10 in Canada's National Mathematics Competition. Armstrong's mother is from California and has a doctorate in bioinformatics. Hayes' parents worked for General Motors in Buffalo and Detroit, but loved chemistry and business, and once received scholarships from a private school.

square root of prosperity

In its early days, it showed an entrepreneurial rest. Armstrong studied on his own in high school and developed an e-commerce business specializing in the computer industry, selling up to 50 people. He is not the only one to see university life without truth. “In fact, math and physics have focused on theory, so it's hard to learn,” CZ said.

The search for financial independence began when coding tech company CZ. Hayes and SBF began to hang out on Wall Street. Armstrong joined Airbnb like he had won the lottery, and now the company is worth $ 115 billion. Like all the other employees, he bought company products. Dan Romero, one of the CEOs of Coinbase, said Armstrong made the early decision to quit Airbnb when he saw confidence in cryptocurrencies.

Armstrong's driving business was on its way to Argentina after graduating from college. There, money laundering pressures also led to further inflation. In Hayes' case, after being fired from the bank, he read about Bitcoin on the financial blog Zerohedge and was fascinated by Bitcoin's inherent scarcity. As a supporter of the gold standard, he immediately thought of Bitcoin. As with gold, a minimal product can support the price of gold. CZ also acknowledges that Bitcoin is "financial, doing the same online for data." For SBF, we see “pretty good business” opportunities.

The great vision of these founders has not yet come true. Bitcoin prices fell from $ 700 in 2016 to $ 50,000 in mid-December of this year, but Bitcoin is rarely used as a payment instrument. However, they believe that over time it will promote "free trade", provide an alternative to negative "fiat" benefits, favor fund consolidation banks, reduce the cost of cross-border payments, and help businesses start to invest. to collect funds. to make it possible anywhere. CZ estimates that 80% of people will be accepting cryptocurrency payments in 5-10 years. When someone asked him two years ago if he could buy a bottle of wine with cryptocurrency, he replied, "I can't hear it." But not more.

Given the beliefs they preach, it seems odd that these manufacturers don't run paid businesses, at least among the skeptics, they run big digital casinos. At that time, the price of Bitcoin in China was very high, so Bitcoin Hayes would be sold abroad for money in China and cross the border with a wallet to start using the cryptocurrency.

BitMex, which he joined in 2014, is a pioneer of crypto “derivatives,” contracts that allow investors to predict the future value of digital assets. The 100x leverage it provides means that a $ 10,000 account on BitMax can be converted into a $ 1 million contract.

Since then, FTX and Binance have increased their capital limits. Although US regulators have restricted trade by offering high-risk services to non-commercial users, users can still use cheap "VPNs" to change IP addresses and bypass restrictions. Today, the volume of the derivatives market far exceeds the actual volume of cryptocurrency exchanges.

The founders think this is not inconsistent. When Armstrong started Coinbase, he believed that creating an exchange of trust would make using cutting edge products easier and safer at the time. Coinbase has not released any derivative products, but has applied for a license. Nine years later, its initial mission has not changed.CZ says his vision is "not low enough to make money, and not high enough to save the world." It's about giving people choices.

Sau: Kristian Hammerstad Source: The Economist

All of them work hard, whether for personal or professional use. Armstrong calls himself "nocturnal" and goes to work from 10 am to midnight. The CZ, who works from home, has telephone conversations with its representative six days a week. The lazy chair next to the table is an SBF bed, spending four to five hours a day resting between scheduled meetings during the day and night. There is no morning or evening in his toxic clock, and what he knows best is "which restaurants are open for take out." On the day of his interview with The Economist, his last meeting was at 5 p.m.

no time to roll the dice

Intelligence, opportunistic idealism, and physical well-being seem to be the key to success in the cryptocurrency space.However, the four designers in our work are completely different, which can determine not only who will be the richest, but ultimately who will design and decide the future of the industry.

In terms of management style. People familiar with SBF describe it as a good management system that allows a lot of work to be done, even if it is a change issue or a non-worker product (like Solana). He also said he would start doing it himself. On the other hand, CZ is more inclined to give strength by exchanging jokes that he is a "bad leader". Binance will control the crypto industry going forward, but CZ has no control over it. In 2018, Binance was awarded the Trust Trust cryptocurrency, and when The Economist interviewed him, he said he had not spoken to the administrator for six months now.

Armstrong represents both excellence and is the forerunner of openness, insight and humility as an image of “our good students”. He insisted on maintaining a reputation for potential success to help his business "stand the test of time." He encourages employees to complain, even if it seems a little foolish to promise a $ 20 (crypto) reward to employees who provide "true and false" information.

Hayes may be the most "star" of the four. He is very attractive and full of muscles and expresses himself well in various programs. “Hayes behaves like James Bond ran the business,” said Rich Rosenblum, founder and CEO of cryptocurrency trading platform GSR. About the present and future of digital finance

Hayes' lifestyle is without disappointment the most 007 aspect. In 2018, he drove the bright orange Lamborghini through the cryptocurrency market and then messaged his followers on Twitter. I practice yoga daily in an amateur league and have recently been teaching kitesurfing. He wears a tight t-shirt and looks luxurious. But his favorite drink is "low impact" alcohol, far from the martini, where Bond likes "not to shake well".

In 2018, there will be a large aquarium at BitMEX's main office in Hong Kong,with shark, I can't shake the desire to be close to the villain in the Bond movie. His aversion to prudence contrasts sharply with the mediocre temperament of the other founders, who had neither car, nor respect, nor carnivorous fish. SBF shared a room with a friend with whom he had previously worked. CZ in a single room in a single room. But he likes to show off gadgets. Hayes has six iPhones on his desk.

Hayes' overeating may help explain why American diets aren't kind to him. The third point that sets them apart from other crypto platform owners is their attitude towards the police, which is also the main reason for their anger with them. By 2020, US regulators have accused Hayes and two BitMEX partners of not doing enough to protect the platform's financial markets. The lawyers against him have been angry with cryptocurrency enthusiasts. They say Hayes paid the price as a trailblazer before the rules were set.

But many foreigners believe he painted the target on his back.In 2016, he said that BitMex's strategy analysis is “decadent gamers”. At the time, the company boasted that for potential US customers, "check-in takes less than 30 seconds." When asked why BitMex was legally listed in African Seychelles in 2019, he pointed out that corruption from US regulators is more expensive and that the island is "at the price of coconuts". Supporters of his case have worked to make the actual transcript of this statement available online. The FBI clearly doesn't like this joke. A year later, the New York president warned that Hayes and his colleagues "would soon see that the golden fruit could not pay for the offense for which they were prosecuted."

In contrast, Armstrong's industrial model is based on the most reliable and compliant exchange. He said early on that he believed that as cryptocurrencies developed, "there will be more censorship." In his first ten employees, he hired lawyers and police to follow, and even "allowed" to meet with the authorities.

"It can hurt sometimes," he said, watching the competitors do whatever they want.His intuition was recognized. In recent months, regulators around the world have shown interest in cryptocurrencies and are starting to tighten their trap. China has declared all virtual currency markets illegal and the US SEC is seeking new powers to oversee its so-called “cryptocurrencies” such as the “Wild West”.

Now Armstrong has said he hopes it will be a "good book" for the administration, indicating that it will affect politics. This is not something that the offshore exchanges of other founders can easily do. Regarding the SBF, she acknowledged that regional protection measures could have a real impact on FTX."If Hong Kong makes a mistake on the Chinese mainland, the FTX will have to take over most of its staff, which will happen" in a few years. "

finally

This ambiguity has led developers to think about many questions, especially how tight regulation or the long-term Bitcoin market will affect their finances. Their wealth is enormous, but the only person capable of liquidation is Armstrong (who sold $ 292 million in Coinbase shares in April 2021). All CZ assets are held in the form of cryptocurrencies, only a few thousand dollars in cash is used for short term use. The wealth of SBF is generally justified in private companies. As the first investor who sued BitMex in 2019, Hayes worked with partners to withdraw $ 140 million from the company. (The lawsuit was dismissed by the court in December 2020.)

It is also difficult to predict how their quartet will develop. When they die, one or more lifestyle changes (like Steve Jobs, who gave everyone a smartphone) or rocket scientists (like Jamie Dimon of JPorgan Chase) will become an international financial model. Like Elon Musk or Jeff Bezos)?

Armstrong is a Musk fan and his soul is like Musk. He said most of his investments were for "moon landing projects" or "philanthropy." He likes "longevity" and biology, and like the director of Tesla, he says he likes finding professionals and experts to study areas he doesn't understand. He recently met the founders of WhatsApp and learned how to "make global products".

At the same time, CZ doesn't have big plans to waste his money in space, and he doesn't spend any other wealth: "I don't want more than $ 100 million." It plans to provide additional funds for medical research. . SBF can do the same. As a vegetarian, he recommends things like treating tropical diseases, promoting infectious disease prevention, and improving animal health.

However, the cryptocurrency contest is not over yet. Like most advanced players in German poker, the four founders have so far hidden their most important card in their pockets and only place big bets when the prices seem to be established. But in order for them to use every token to bet on the other side of the cryptocurrency boom, they need more than natural IQ and self-control.This is because winning a game of poker is usually decided not by skill but by additional luck.