New York Times: Crypto's fragile foundations
My article in the New York Times describes the common practice throughout the cryptocurrency industry that can lead to death spirals like the one at FTX.
I published an article (archive) this morning in the New York Times that describes how FTX used the FTT token it had created to lay the foundation of its balance sheet and take out large loans. When people learned in November 2022 the extent to which FTX and its sibling firm, Alameda Research, relied on FTT, it contributed to a panic that threw FTX into a death spiral:
However, cryptocurrency companies regularly mint their own tokens, even though the common practice can introduce massive, undisclosed fragility if used in this way. We’ve already seen it go terribly wrong with FTX and with Celsius. Who will be next?