![]() The CEO of FTX, Sam Bankman-Fried-who happens to be a big celebrity in the crypto world, as well as an influential philanthropist-also co-founded a hedge fund called Alameda Research. So the value of this token was going up, so people were trading it as you would typically trade any kind of stock or crypto. And also because it was considered to be such a successful company, then there was a lot of demand for this token. ![]() MARKOVICH: Basically, if you were holding their token, then you would get a discount, for example, on some of the fees. PAVIN: OK! Now, FTX also happens to have its own cryptocurrency called FTT. If you are just using your wallet and transferring money from one wallet to the other, you don’t need any other third party. ![]() But if you want to just use Bitcoin as a payment, you can use it in a decentralized way. So Bitcoin is completely decentralized and it is being exchanged and traded on centralized exchanges. ![]() They need your password, they need your keys, in a way, in order to access it. And then if you want to perform any kind of transaction, then you are the one who’s authorizing it and no one else is going to have access to it. You have your own wallet where you’re keeping everything that you want to keep. MARKOVICH: When you’re thinking about decentralized projects, no one holds your money, no one holds your information, your data-it is you who decides. PAVIN: But there are also decentralized exchanges-and a lot of decentralized cryptocurrencies. And then the organization is going to perform the activities that you want it to perform. MARKOVICH: So when we think about something that is centralized, basically that means that there is a central authority or there is a large or small organization behind it that’s making decisions and also has access to whether it’s your data or your money or whatever it is-because it all kind of goes to the organization. And people trade all manner of cryptocurrencies on it, like BitCoin, DogeCoin, you name it.Īnd this part is key: because FTX is a centralized exchange, it actually holds, and has access to, people’s money. PAVIN: There are other centralized exchanges in the crypto world, like Coinbase and Binance, but FTX is a big one, valued earlier this year at about $32 billion. However, instead of letting you buy and sell stocks of large organizations, it lets you buy and sell crypto. So when you think about FTX, FTX is just the New York Stock Exchange. Sarit MARKOVICH: FTX is a centralized exchange. So, first off: What, exactly, is FTX? Markovich explains. But definitely check out the Q&A we did with Markovich on our website at. Quick note: We didn’t initially intend for this to be a podcast when we recorded this, so we didn’t fully control for some of the background noises you’re about to hear. And she tells us what FTX’s fall could mean going forward. This episode, she helps us wrap our heads around the collapse of FTX-and how it fits into the broader cryptocurrency landscape. She’s a clinical professor of strategy at Kellogg, and she studies IT markets and fintech. But maybe, like a lot of people, your knowledge about it stops there. FTX, you might know, is a cryptocurrency exchange. Welcome to the next season of The Insightful Leader podcast! Let’s talk about FTX. Laura PAVIN: Hey everybody, it’s Laura Pavin.
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