No Real Humans Were Harmed in the Collapse of this Exchange
FTX: a Snake Oil Con for the 21st Century
Introduction
In the ever-evolving landscape of technology, the allure of the new and the promise of the revolutionary often blur the lines between genuine innovation and deceptive practices. One such deceptive practice, as old as commerce itself, is the “snake oil” scam. This scam thrives on the public’s naive belief in new technologies, exploiting their lack of understanding and their hope for a better future. In 2023, this age-old scam has found a new playground: the cryptocurrency industry.
The “snake oil” scam is not merely false advertising. It is a carefully crafted deception that mimics real and new technologies, designed to ensnare those who are not well-versed in the intricacies of the field. In the realm of cryptocurrencies, this scam has manifested itself through entities like FTX and its founder, Sam Bankman-Fried (SBF).
FTX and SBF, in many ways, can be seen as modern-day “snake oil” salesmen. They have exploited the cryptocurrency industry, not contributing to its growth or innovation, but rather using it as a means to their own ends. Their operations bear a striking resemblance to the historical “snake oil” scams, suggesting that if SBF were alive a century ago, he would have been selling literal snake oil.
FTX’s primary target audience was new, uninformed users who were easily swayed by the hype surrounding the platform. Real cryptocurrency users, those who understood the industry and its workings, were largely unaffected by FTX. They recognized it as a scam from the beginning. Anecdotal evidence suggests that FTX customers were all new to the cryptocurrency space and thus more susceptible to the scam.
The true nature of FTX’s operations was far from the image they projected. SBF wasn’t selling cryptocurrency but was merely taking people’s money and replacing it with made-up numbers in a database. Seasoned cryptocurrency users didn’t give FTX the time of day, with the platform only attracting support from other questionable entities in the industry.
In the following sections, we will delve into case studies of a real cryptocurrency exchange (Kraken) and a fake one (OneCoin), discuss why real users didn’t use FTX, and explore the red flags associated with FTX’s rapid growth and its token.
The main argument that will be developed throughout this article is that the collapse of FTX did not harm the real cryptocurrency industry or its knowledgeable users. Instead, it served as a stark reminder of the persistence of scams in the face of new technologies and the importance of informed decision-making in the digital age.
2: Kraken — A REAL Exchange Case Study
Kraken is a legitimate cryptocurrency exchange that has grown organically over the years.
Founded in 2011 by Jesse Powell, who saw the potential of Bitcoin and wanted to create a secure and reliable exchange for users. From the beginning, Kraken focused on security and regulatory compliance, which helped it gain the trust of experienced cryptocurrency users. Over the years, Kraken has expanded into new markets and acquired other companies, such as Crypto Facilities, a derivatives trading platform. Today, Kraken is one of the largest and most respected cryptocurrency exchanges in the world.
Like any cryptocurrency exchange, Kraken has faced challenges over the years. In 2014, it suffered a major hack that resulted in the loss of around 850,000 Bitcoins. However, Kraken was able to recover from the hack and improve its security measures to prevent future breaches. Kraken has also worked closely with regulators to ensure compliance with laws and regulations in various jurisdictions.
Kraken offers a wide range of trading pairs and supports various cryptocurrencies, including Bitcoin, Ethereum, and Litecoin. Its trading platform is user-friendly and offers advanced features such as margin trading and staking services. Kraken also offers a mobile app for trading on the go.
Kraken’s growth and operations differ significantly from FTX’s approach. Kraken has focused on organic growth and building a reputation as a trustworthy and reliable exchange, while FTX pursued rapid expansion and extravagant spending. Kraken’s emphasis on security and regulatory compliance sets it apart from FTX’s lack of transparency and questionable practices.
Kraken serves as a prime example of a legitimate cryptocurrency exchange that has grown organically over the years. Its focus on security, compliance, and user experience has earned it the trust of experienced cryptocurrency users. In contrast, FTX’s approach was more akin to a scam, targeting new and uninformed users with promises of quick profits. By comparing Kraken’s success with FTX’s failure, we can learn valuable lessons about the importance of transparency, security, and regulatory compliance in the cryptocurrency industry.
3: OneCoin — A FAKE Exchange Case Study
OneCoin was a fraudulent cryptocurrency exchange that emerged in 2014, claiming to have a built-in exchange for its fake token. The company had no known developers or owners, and all of its customers were new to the crypto space. The crypto community quickly recognized OneCoin as a scam, and it was eventually shut down by authorities in several countries.
FTX and OneCoin share many similarities in their operations and tactics. Both companies targeted new, uninformed users and were led by dubious figures. While FTX separated its token and exchange better than OneCoin, both benefitted from a “smart” leader. The article argues that FTX and OneCoin were not real cryptocurrency exchanges, but rather scams designed to take advantage of new users.
It is worth noting that OneCoin was a classic example of a fake cryptocurrency exchange. The company emerged out of nowhere, with no known developers or owners, and claimed to have a built-in exchange for its fake token. All of its customers were new to the crypto space, and the crypto community quickly recognized OneCoin as a scam.
OneCoin and FTX share many similarities in their operations and tactics. Both companies targeted new, uninformed users and were led by dubious figures. While FTX separated its token and exchange better than OneCoin, both benefitted from a “smart” leader. The article argues that FTX and OneCoin were not real cryptocurrency exchanges, but rather scams designed to take advantage of new users.
The collapse of OneCoin and FTX highlights the importance of educating new users about the cryptocurrency industry. The article emphasizes the need for caution and skepticism when dealing with new and untested exchanges. The crypto community must remain vigilant and continue to expose fraudulent schemes in the industry.
The collapse of OneCoin and FTX did not harm knowledgeable crypto users. However, it is important to remain vigilant against fraudulent schemes in the cryptocurrency industry. The article reiterates the importance of educating new users and encourages the crypto community to continue exposing scams and promoting transparency in the industry.
4: Real Users Avoided FTX
FTX’s primary customer base consisted of new, uninformed users who were easily swayed by hype and false promises. Experienced cryptocurrency users, especially those using XMR and BCH, steered clear of FTX due to its lack of transparency and questionable practices. Real users knew that FTX was not a legitimate exchange and was likely a scam. FTX’s rapid growth and extravagant spending were immediate red flags to seasoned crypto users, and online warnings and discussions about FTX’s potential risks were prevalent in the crypto community. The FTX token itself was an obvious scam, lagging behind similar attempts by other exchanges.
Real users, especially those using XMR and BCH, avoided FTX. They knew that FTX was not a legitimate exchange and was likely a scam. FTX’s lack of transparency and questionable practices were immediate red flags to seasoned crypto users. Real users were not attracted to FTX’s marketing tactics and approach, which were designed to attract new users who were easily swayed by hype and false promises.
Real users’ avoidance of FTX was due to their experience in the cryptocurrency industry. They knew what a legitimate exchange looked like and how it operated. FTX’s approach and tactics were compared to those of other legitimate exchanges like Kraken, which have grown organically over years, facing challenges and regulatory scrutiny. Real users in the crypto community have seen what an organically growing exchange looks like, and FTX did not fit that mold.
Real users were not attracted to FTX’s marketing tactics and approach, which were designed to attract new users who were easily swayed by hype and false promises. FTX’s lack of transparency and questionable practices were immediate red flags to seasoned crypto users, and they steered clear of the exchange. Lessons learned from the FTX case and implications for the future of the cryptocurrency industry were discussed. The article predicts that the next big scam in the cryptocurrency industry will be an “FTX” for NFTs, targeting new and uninformed users.