FTX’s Sam Bankman-Fried Once Said Blockchain Would’ve Fixed Enron

Sam Bankman-Fried, the founding father of hedge fund Alameda Research and crypto platform FTX, was a frequent visitor on each mainstream monetary information and extra area of interest crypto podcasts. And whereas digging by his media appearances over time, Gizmodo has stumbled upon a really bizarre analogy from SBF, as he was typically recognized, the place the now-former billionaire defined that large fraud at Enron wouldn’t have been potential if the corporate used the blockchain.

SBF appeared on the “Jax Jones and Martin Warner Show” on YouTube again in June of 2021 was discussing the wonders of blockchain expertise, and needed to clarify the way it may very well be used to verify unhealthy issues couldn’t occur. SBF requested one of many hosts to present him an instance of an organization that had been in hassle. Amazingly, one of many hosts urged Enron for example, an organization title that appears perversely humorous in hindsight. And SBF simply rolled with it.

“What were some of the biggest shitshows that big companies have gone through… over the last year? Really negative incidents that really hurt their user base? Like what are the first ones that come to mind?” SBF requested within the YouTube video beginning across the 52:20 mark.

“Well, take Enron,” one of many hosts suggests.

“Yeah, okay, great, Enron,” SBF says. “Not a good situation.”

“I admit that was a bit of a curveball, but I think they all apply,” the host says.

“What happened with Enron? Well, they cooked their books, you know, what could you do? Well, if you make books be on chain, at least some pieces of it, some checksums for it, it makes it a lot harder to fabricate them,” SBF stated.

Enron, after all, was a Texas-based vitality firm that was manipulating its books, regardless of audits by a supposedly respected agency often known as Arthur Andersen. Enron made $74 billion in investor property disappear when it filed for chapter in 2001. And if the allegations in opposition to FTX are right, and SBF was co-mingling funds by taking buyer deposits on FTX and playing them away at its sister firm Alameda Research, there’s loads of room for comparability in these multi-billion greenback implosions.

But was SBF proper about blockchain? And what the hell is that this blockchain? Blockchain could be regarded as primarily a decentralized database that’s maintained by providing incentives for folks to maintain the community up and working. In the case of Bitcoin’s blockchain, the inducement is Bitcoin, as that’s what all these “miners” are doing all day lengthy once they’re utilizing a lot vitality—they’re primarily sustaining a database of transactions within the sky and getting paid for it in Bitcoin.

But would Enron have been stored extra trustworthy if its books had been stored on the blockchain? Maybe. But it’s onerous to think about any firm wanting all of its monetary information saved in such a public method. SBF means that “some pieces” of Enron’s books may need benefited from being on the blockchain, however that’s actually not the case for some other massive firm in the actual world.

In truth, most of these “we’re moving to blockchain” articles you examine a number of years in the past are fully outdated now. The corporations who tried to make use of blockchain expertise attributable to all of the hype discovered really transferring to a blockchain database to be expensive and unnecessary.

Ironically, FTX wasn’t conserving something essential on the blockchain when SBF was advocating for its use. It really would’ve been helpful to maintain the corporate trustworthy if there had been an correct ledger of all of the methods cash was transferring between FTX and Alameda. But that wasn’t taking place throughout the firm, and blockchain in all probability wouldn’t have been the reply.

Bitcoin’s blockchain can solely course of roughly seven transactions per second, which is simply one of many causes it hasn’t turn out to be a great way to pay for issues. And whereas Ethereum is a bit higher at 20 transactions per second, that’s nothing whenever you check out our fashionable digital monetary system. Visa can course of 24,000 transactions per second, in accordance with Crypto.com. And till crypto can get near Visa’s numbers, folks will nonetheless be utilizing Bitcoin for little greater than get wealthy fast schemes.