Like many people in crypto, Sam Bankman-Fried is in for the money. As the founder of the quant trading company Alameda Research, sharing FTX and DeFi protocol serum, the curly 28-year-old has a $ 10 billion in fortune in the industry in just three years.
However, unlike most crypto folks, he builds a fortune to give away half of it. As an “effective altruist”, he essentially deprives the rich of his supernatural crypto trading strategies in order to give something to the poor.
“Maybe without the robbing part,” he says. “In the end, my goal is to have as much impact as possible. And right now I think this is flowing through donations to find out how to make as much as possible and donate as much as possible. “
SBF, as it is sometimes called, has been going this way for some time. He spent a few months in 2017 as director of development at the Center for Effective Altruism, and previously gave up half of his income while on Wall Street. He also plans to give away around 50% of his crypto billions – but only after completing his reinvestment in his ever-expanding empire.
However, he donates to causes that emerge. He was the second largest donor to President Joe Biden’s campaign after former New York City Mayor Michael Bloomberg, raising $ 5.2 million.
“I was excited about the possible effects. I basically thought that what happened in the elections was important. “
Also the FTX Foundation started recently. It is giving away 1% of the platform’s fees and pooling user donations dollar for dollar up to $ 10,000 per day. In its first few weeks, the foundation raised more than $ 2 million, mostly in the form of user contributions, with users voting from a carefully curated list on recipient charities.
The old beanbag
SBF’s growing public profile received a shot in the arm when he was named Forbes 30 Under 30 financial list for this year. “I’m honored,” he says. “I tend to look ahead rather than back, so it was a little cool, but it went down pretty quickly.”
It also came in third lately Cointelegraph Top 100.
He is famous for sleeping on his beanbag chair in his Hong Kong office so that he never misses a deal. It seems to be a major reason SBF makes more money than anyone else because he’s rarely ever away from the watch.
“I’m in the office, usually 24 hours a day. I just take a nap here on a beanbag sometimes and obviously shoot with coworkers and sometimes with people online, but mostly with his work.”
He doesn’t have a girlfriend or even see many people outside of work, although he takes time to speak to his family on the phone “a few times a week” with his family in the US. It’s safe to say that SBF is not the type who desperately wants to achieve the perfect work-life balance or who even accepts that productivity declines after the first 11 hours at work.
“I think this type of narrative is essentially oversold and the brutal or inspiring truth, depending on how you think about it, is that the more you put in, the more you come out,” he says. “It motivates me and it fulfills me, but you know another piece of it is that I think I can be the most influential.”
How did i get here?
As the child of two Stanford Law professors, SBF discovered this Effective altruism Movement while studying physics at the Massachusetts Institute of Technology.
Popularized by philosophers and ethicists such as Toby Ord and Peter Singer, the movement focuses on pragmatic ways to help others use science and reason to ensure that benefits are maximized, rather than good intentions and poor results that make some nonprofits stand out. This practical approach also extends to an in-depth examination of how a person can best help.
“Imagine how much good you could be working right away for any reason versus the amount you could work on Wall Street and donate to it. In many cases, you could probably actually help them more with the donations. And so I basically checked out Wall Street. “
Friends interned with a quantitative trading firm Jane Street Capital gave him the path to Wall Street and he started there right out of college in 2014. Why did they hire a physics major with very little financial experience right out of school, you ask?
It turns out that quantitative trading strategies are “super valuable” trade secrets, which means that no one teaches the successful ones in college degrees. Instead, companies recruit people with raw talent: mathematicians or people with a strong background in physics or computer science.
“What you need to know about markets, they will teach,” he says. He traded a wide variety of ETFs, futures, currencies, and stocks and designed an automated OTC trading system. There he was interested in the insanely profitable arbitrage opportunities in the inefficient crypto markets and founded the crypto-quant trading company Alameda Research at the end of 2017 to profit from it.
The whale that rules all whales
Alameda Research has now grown to become one of the largest crypto companies with around $ 2.5 billion in assets under management, though SBF qualifies this as its own assets with some reservations about liquid and illiquid assets.
Alameda is the Moby Dick of the crypto whales, responsible for up to 10% of the cryptocurrency that moves in the markets at the same time. “I think at certain times it can go up to that fraction of the volume,” he says. “I think the average is a little lower. It is firmly in the group of five to ten larger trading companies in the room. “
This means that every trade that Alameda makes has the potential to move markets and cause liquidations. Alameda was widespread in October last year accused of crashing YFI’s price by short circuit, although SBF has downplayed every effect. He believes that with great power comes great responsibility.
“It’s absolutely a responsibility,” he says, adding that he’s trying to follow the TradFi-Quant company approach. “Your job is to find profitable trades, but also to provide liquidity and promote healthy markets,” he says. “The greatest duty is the duty not to cause harm. And to ensure that by and large you are promoting liquidity in healthy markets and trading efficiently, rather than intervening. “
He adds that arbitrage deals, for example, can have a positive impact by making markets more efficient and lowering prices on premiums. The reason for starting Alameda was to find out and figure out how to profit from arbitrage deals. “One of the first big ones that we actually made some money with was Litecoin,” he recalls.
“At the end of 2017 there was a week in which Litecoin was traded on Coinbase GDAX at a constant premium of 20% [now Coinbase Pro]. There’s kind of this idea like, “Oh, that’s cool, you only make 10% every half an hour, I think you make infinite money?” And of course that’s not the answer. “
It turns out that trying to take advantage of the opportunity was terribly complicated and necessary to bypass trade size restrictions and withdrawal limits of one million per day. “A few years ago in particular, it was a big problem in cryptography to find out the logistical steps,” he says.
In another arbitrage trade, SBF and friends moved up $ 25 million a day through a number of intermediaries and rural banks in Japan to take advantage of the famous Kimchee Premium, which traded Bitcoin up to a third more in South Korea’s elusive financial system than in the US.
But it was about the old financial system, which poses the greatest challenges. “The hardest part of the arbitrage, the slowest and toughest and most expensive and most frustrating piece, was the fiat,” he says, noting difficulties getting accounts that can then be closed at any time, the archaic procedures and bureaucracy and insanely slow transfers.
“We spent five man-hours a day in physical bank branches for a good five months because that was exactly what was needed to send the transfers,” he says, adding:
“As if we got there at 10am and stayed there with several people until 1pm to have all the meetings we had to have every single King’s Day of the week to send the same transfer we sent yesterday.”
This is one of the reasons SBF loves DeFi so passionately – his vision is to one day replace the cumbersome existing financial system. “The current payment channels are not efficient at all,” he says. There are trillions of dollars in companies just aiming to abstract that away, and you end up with this incredibly complex web of shit to use for most people. They run on systems that are old and not even designed for the internet. “
For many people, SBF emerged as a major crypto and DeFi personality during the DeFi boom in mid-2020 when it began to impact on Crypto Twitter. This was a deliberate move: he was happy to fly under the radar in 2018 because Alameda’s focus on quantitative trading was, “Very little need for advertising, it’s mostly a downside.” When he started the innovative FTX crypto exchange in 2019, he had to build a community and campaign to become his public face on social media.
“With FTX as a retail business, the more customers, the better. You can build the best product in the world, but if nobody knows about it, it’s worthless, ”he says.
“One of the hardest and most interesting pieces was figuring out how to attract users, and awareness was a big part of that.”
He appears to have found out when FTX became the fifth largest futures exchange by volume, valued at $ 3.5 billion. The company has launched a number of innovative markets, including token stock offerings from companies like Tesla, Apple, and Amazon, as well as pre-IPO trading on Coinbase.
He also uses his wealth and influence to try to overcome what he sees as the biggest blocker preventing the widespread adoption of DeFi. He believes Ethereum, including Eth2, is not scalable enough for crypto and DeFi to replace the existing financial system. DeFi can currently process around 10 transactions per second, with second-layer solutions enabling several thousand TPS.
“This is an absolutely tough, immovable barrier to growth,” he says. “DeFi literally cannot grow as an ecosystem until this is fixed. Hence, no long-term plan is feasible that does not address it. […] It’s just fatal. “Even Eth2’s goal of 100,000 TPS is not enough, which SBF plans to do.
“If your goal is to scale to 100 million or a billion users, […] If you want to take advantage of an application that can potentially be the size of the largest applications in the world, it must be able to scale up to a million transactions per second. And so, you can just permanently cross the list without recourse and don’t even have to consider another factor, a scaling solution that won’t get there if that’s your goal. “
This led him to become one of the most vocal proponents of Solana, a blockchain that can currently handle 65,000 TPS and whose team claims it can eventually be scaled to staggering values: 710,000 TPS on a 1 Gigabit link or more 28.4 million TPS at 40 gigabits Shortcut.
He founded the serum DEX on Solana and launched the SRM cryptocurrency in August 2020. Bankman-Fried says you can see Solana’s benefits in Serum’s on-chain order book matching engine and fees of 100 cents to ship an order and trade in seconds. ”
“So the higher throughput brings a lot of juice. And that really helped grow that product base significantly. To the point where I think we probably assume Serum DEX has consumed more transactions in six months than the entire Ethereum blockchain in history. “
Due to the network effects of Ethereum, he faces an uphill battle in which DeFi projects and users have to migrate to Solana. Even after he was given control of SushiSwap from Chef NomiHe was unable to convince the community to port. “Porting the existing projects was a lot harder than we thought, and it was a lot easier just creating new projects,” he explains, adding:
“We would still be very happy if you had an outpost on Solana. I think you can someday. But I also think the serums will march in both directions. In the end, I kind of want to have the best products and users, you know, but it depends there. “
(After our interview, a new suggestion came up to make a version of SushiSwap on Solana and Serum that may be called bonsai.)
“The other part is that while the current DeFi user base is very engaged, very important, and powerful, it isn’t that big. Daily active users, I think tens of thousands. I think FTX probably has more daily active users than all of them DeFi together. “
SBF’s plan appears to be to embed the Solana blockchain as an infrastructure in apps where it is invisible to most users in order to integrate millions into DeFi. At the beginning of 2021 Alameda initiated a $ 50 million financing round Embed DeFi-style tools in Maps.me, a European offline mapping application with 140 million users. There will be a multi-currency wallet with stakeout and exchange options on Solana. FTX’s purchase of Blockfolio could follow a similar strategy.
“I think it’s going to be a really cool product and a powerful suite of products for the app,” he says of Maps.me. “I’m super excited about this. I think it could really kickstart adoption.