2022's Biggest Crypto Moments

Hey Bankless Nation, I hope you're ready for a special Bankless episode. David and I are about to go through the biggest moments of 2022 in crypto. David, I am very much looking forward to this episode because look, this is a chance to like review the year that was, this year of craziness, this year of corruption, this year of scams, this year of the highest highs and incredibly low lows. And uh it felt like an entire, like a blurt to me. I didn't even know what months of the year what happened. And so this is a good way to calibrate. It's also for me personally, David, I just want to be done with 2022.

Like, can we move on? Can we wipe the slate clean? Can we start again?

Yeah,

Closure would be nice.

that's exactly what that what happens. As soon as as soon as we get to January, this all goes away and we all get to start all over again.

We're done there.

Alright, so we're gonna go through the biggest moments of 2022. And uh, David, you were kind enough to put uh together this program, this kind of a I guess uh ceremony for us, and um God is through. I think we have twenty five or so different moments that we're gonna talk about. There's the top five worst moments.

Of 2022. I can't wait to see what you put there. The top five best moments, the five biggest villains. That had to be fun. Yeah. A lot of selections there. The top five heroes, we still have those in crypto. And uh you've got some honorable mentions here too. Anything else you want to say before we start getting into this?

Yeah, this is a you know, December is a month for reflection. Uh let's let's go through the biggest events of twenty twenty two, for better or for worse, the heroes and the villains. And just like let's make sure that we absorbed the lessons so we don't repeat them again. Uh and my it is worth noting, Ryan, that the top five villains and top five worst ha uh events of twenty twenty two was that was a a lot b both of those sections were a lot easier than their their inverse, let me tell you.

Oh, wait, wait. It's harder to find uh heroes than villains.

Yeah, you can.

Satoshi

Yeah, Satoshi Nakamoto, the hero of 2022. Like, no, he's like not relevant. And so it was the villains and the worst moments of 2022 was pretty damn easy. Um I was also going to do a section of the top most infamous tweets of 2022, but that actually also happened to correlate very, very strongly with the top five villains of twenty twenty two.

villains were tweeting the

They they w they were the worst tweets. So that section has been collapsed. So if you are also interested in seeing the top five worst tweets of twenty twenty two, uh that's gonna be the the villain section. It's all it's eight

tune.

It's twenty twenty two all inside of one episode.

You ready?

Uh yeah, but before we get there, David, I want to shout out uh some heroes that I know in Bankless, the bankless community. That is the folks over at Opolis. Uh, because they are doing something. They're heroes of healthcare and heroes of payroll benefits, and they are providing those to Web3 workers. These are contractors in the Web3 space. Uh, David, tell them a bit more about Opolus, what they do, and how folks can get started with that in December as they move into 2023.

As we say at the end of every single bankless podcast, working on the frontier is risky, especially without healthcare, because there are all of these nation-state burdens, these nation-state requirements that we all must partake in in order to live our life in this physical world. But if you're working in the metaverse, you kind of need some help to couple your web 3 world and the nation-state world. So what do you need? You need healthcare as an independent worker. You also need compliance with taxes, payroll stuff, just all the stuff that you would get if you worked at a very large company. But since you are a worker on the Web3 frontier, you're an NFT artist, you work in a DAO, you work independently, whatever you, whatever you do. You can use Opolus to get all of your perks of working for a big, big company, yet still be working in the frontier. So what is Opolus? Opolis is a co-op that can help negotiate on your behalf for privileged rates with healthcare and help you with just all of your infrastructure that you need to be a worker. And so to help you do what you do best, which is creating value and running your business, use Opolus to negotiate for your healthcare and do all these other things that make working in crypto easier. If you sign up for Opolus by December 31st of this year, which is coming up, you need you can get a 1000 work and 1000 bank tone uh bank token bonus. Uh so uh there's a link in the show notes to go ahead and get started with Opolis.

Definitely go do that. All right, David. You know what? We should get right in. Uh, we can cut for breaks later. This is too important. Okay. Uh gotta get to, I think we start here with the top five worst moments of

I'll get it out of the way.

2022. All right. Let's uh let's do the vegetables before we get to uh the dessert. Okay. Top five worst moments. And how are we doing this? Are we going from from uh number five and counting upwards?

Yeah, yeah. So start starting with the fifth worst moment and then leading into the worst moment. So starting with number five. Number five, coming in hot. Tornado cash, a smart contract, was deemed illegal by the most powerful nation on the world. Tornado Cash was sanctioned. For the first time ever, a smart contract was deemed illegal by the same entity that has the biggest army. That's bad. So that was that was another the fifth worst. Why is it the fifth rather than fourth or third or any anything more severe than that? Because I think it could be worse. Because this gives the crypto industry surface area to fight back. So while it was bad, while this action by the United States removed the ability to access privacy by United States citizens, uh it also gave us an opportunity. And so coming in number five, the tornado cash ban.

Let me talk about that opportunity actually. It's an opportunity that my co host, David Hoffman, is taking, which is to sue the Department of Treasury. David, you spelled treasury wrong in this too. I did I

It did spell

The Treasury. Anger and disrespect. All right. You don't even get the A in Treasury, Treasury Department. So that's kind of cool. And like you said, this is an opportunity to push back and uh re-establish our civic rights. Uh Americans, if you believe that American citizens or people around the world, whatever nation-state jurisdiction you're in, should have the right to interact with smart contract protocols without their nation-state creating a blacklist that effectively makes it illegal for them to do so, particularly on-chain privacy, then you might be supportive of some of the actions that the industry is taking to push back. So you're right, David. It's been a great rallying cry. We still have somebody, by the way, uh in jail in jail in the Netherlands, um, Alexei Pertsev, who is in jail as a result of this, one of the developers behind Tornado Cash, but it gives us an opportunity to kind of stand up for these rights and reestablish them and fight it in the court system, which is exactly where the industry is taking it. So that's number five. All right, let's next.

Yes. Number four, sadly, there is very little silver lining on this one. There's no coming back from the Terra Luna collapse. One of the largest capital destruction events in human history. 50 to 60 billion dollars went to zero over the course of a week. And so we all know we all know the Terra Luna collapse. Started in February until it really crescendoed in May, where everything went to zero in May after Doquan Icarus probably did the biggest Icarusing of all of the 2022 Icarusing, although I mean, yeah, I could that's debatable. But Terra Luna collapse uh again, the biggest, most destructive capital destruction event in I think, I'm pretty sure in human history.

I'm uh I'm betting we're gonna see Doquan again on this list in some form or fashion. I was just

This is this is not Doquan, this is Terra Luna.

You know what blew blew me away though is how fast this happened. Do you remember? And this was like textbook collapse. We had just four weeks previous. So this happened what in like May?

Mm-hmm.

Like first part of May, maybe the end of April, something like this. Uh wait, this is an August 19th article. Oh, this is a whole recap.

Yeah, yeah.

Okay, anyway, I I remember it well, it happened, and not like three weeks prior, maybe four weeks prior, we had this fero this debate on Bankless. And there was the Bull case and the bear case, and and uh Jordy Alexander was was the bear, somebody from Delphi Digital was a Luna Terra, uh Bull was was the pro. And I remember doing that episode and getting completely slammed by the Terra. For what I thought was uh uh yeah, by the Lunatech community. Like there was this frenzy of like, hey, ETH Maxies, you you shouldn't like you don't know what you're talking about. Um Jordi Alexander's uh completely out to lunch, all of these things. And then textbook. This all happened in a week in 24 hours. It was obvious this thing was collapsing towards zero, and then it and then it happened. Um, pretty crazy event. All right, what do we got? Number three.

Number three, three arrows capital triggers all of the contagion that put us into this goddamn mess. And so uh but just to just to tie off number four terror terror collapse, reflecting, going, looking backwards, what did we learn? Algorithmic stable coins don't work. That was the big lesson that we walked away with. Going into number three, three arrows capital, what did we learn? Don't put traders on pedestals. No one is a god in this space, no one's special. Hubris is the downfall of everyone that crashed in 2022. And this also happened as a result of the Terra Luna collapse. Now, why is this bigger and worse than the Terra Luna collapse? Because of uh while Do Quan's toxicity and hubris definitely caused the uh destruction of the Terra Luna ecosystem, it was three Eros Capital and other hedge funds like Alameda that took that destruction and spread it out to the industry. Because rather than taking the L themselves, Ryan, what did they do? If they had just like taken their the L and not had and just like, you know, closed up shop, that would have been one thing. But what did they do? They borrowed from BlockFi, they borrowed from Genesis, they borrowed from anyone who gets Voyager, not even a lending service, a centralized exchange. They borrowed from anyone who would ever give them money because they refused to take the L. And so they socialized their losses to the rest of the industry by taking every single credit facility down with them, which ultimately flowed into retail and customer deposits. So three Airs Capital coming in at number three uh for spreading all of the contagion and not being willing to take the L.

It's a big list to be on. Number three. Coming in at number three. And there were a lot of uh worst moments in 2022. All right, but uh tell us about number two because I'm curious. There's two slots left here, okay? So I know what one of them is going to be, undoubtedly, but I'm a little curious what the other one's going to be. Uh why don't we open up number two?

Number two, the Ronin and Wormhole Cross Chain Bridges hacks. Wormhole got hacked in February of 2022 to the tune of uh $321 million for the largest hack so far in that bull market. Uh Wormhole was actually replenished by Jump Capital, uh, which actually ended up being one of the reasons why some of the contagion was so bad because Jump didn't have fresh powder to save the industry because they already saved it with Wormhole. Wouldn't have been so bad, Ryan, uh, if Ronin also hadn't also been hacked later in that year to the tune of $615 million of crypto.

Over half a billion dollars. This is like those two combined. That's like a billion dollars.

A billion dollars. Absolutely. And one of the reasons why the Ronin chain, uh the Ronin chain is uh exploit was so bad uh was because of the way that private keys were held. Uh five out of the seven uh nodes to multi-sig nodes to that was operating the multi-sig cross layer one bridge were all held in the same server. And so when North Korea, if you remember, hacked the Ronin sidechain, it was because they put all the private keys online on one server, allowing North Korea to seize $615 million, which, Ryan, one of the reasons why this event was so bad was it because it led to the sanctioning of Tornado Cash, because the money out of the Ronin sidechain went into Tornado Cash. So because of the incompetence of the Ronin sidechain and the insecurity of uh layer one bridges, I have to go to Janet Yellen.

God damn it.

It's all linked together.

Yeah, it just gave Treasury sort of an excuse and a reason to take these actions. And what a massive uh hack. Uh, you know, I I was gonna I was gonna doubt you for putting them at number two and not like Luna and Terra uh and three arrows capital higher. But I think the justification that that you just gave, like sloppy code, just sloppiness in general, taking shortcuts is kind of the common theme that that led to this, and uh two absolutely massive security shortcuts. Even though they were mistakes, uh they led to some pretty disastrous outcomes for uh for crypto.

So what did we learn? What did we learn with that one? With Ronin and Wormhole?

Cross chain bridges are insecure. If we're gonna live in a polychain, multi-chain world, it's not going to be through a mesh network of insecure one off bridges.

I love that you're teaching along the way. So these aren't just like worst moments, these are uh teachable moments for us, huh?

Brian, I do not want to do twenty twenty two again.

Let's not do this in 2023.

Uh-huh.

Alright, well, number one, probably then let's say not only the the the number one worst moment of 2022, which is saying something, but also the number one most teachable moment because David, you're gonna give us a lesson at the end of whatever's that number one. Uh, but I'm pretty sure I know what it is. You ready for it?

Yeah, let's do it.

Ooh, one more. Uh this is SBF saying a competitor is trying to go after us under false rumors. FTX is fine, assets are fine. Uh this was tweeted by SBF on November 7th of 2022, just a few days before Chapter 11 bankruptcy was filed. Uh as it turns out, assets are not fine. Uh November 11th, four days later, FTX, FTX US, and Alameda Research, and uh over a hundred more affiliates filed for bankruptcy in Delaware. Uh, not after Ryan sending over $70 million into political donations, $135 million to buy the FTX Arena naming rights, $256 million in 30 different uh 35 different Bahamian real estate properties, and also $300 million into the pocket of FBSBF, all coming with

Personally cashed out.

personally cashed out. Yeah. And so why is this coming in at number one? Not only

I think I think I know why.

It kinda kind of teaches itself. But just like Three Euros Capital, what did they do when both Alamina and FTX were going under? They borrowed and they spread the contagion and they took as many people down with them as possible. And so the hubris of FTX took that, their their mistakes, and they spread it out into the industry, and is why the word contagion has been said so many times. The other reason why this is the worst event in 2022 was actually, it started in 2021. FTX was a fraud to begin with. Once he was tapped out all out of those lines of credit, he printed funny money in FTT, whatever he could do to get his hands on cash.

Ryan, what did we learn? What did we learn as a result? What did you learn as a result of FTX?

I learned something that I've said on the podcast a few times now, but was something I actually learned um from um some of the Bitcoin OGs in the space. Uh Andreas Antonopoulos, uh, most specifically, and that is this.

Not your keys,

not your coins.