Our Redemptive Conflagration
We have something to thank the newly disgraced Sam Bankman-Fried for: a clear, highly visible reminder of why we must renew our stewardship of the principles upon which crypto was founded: decentralization, trustlessness, and transparency.
“Listening for a few moments, and thinking it must be near morning, I composed myself to sleep again, but was restless, and my mind became gradually filled with a dread for which I could not account. At length, to assure myself, I rose and went to the window, threw open the blinds, and gazed upon a sheet of flame towering one hundred feet above the top of the hotel, and upon a shower of sparks as copious as drops in a thunder-storm.”
- Illustrator John R. Chapin during the Great Chicago Fire of 1871
At around 8:30 pm on October 8th of 1871, it is said that a cow knocked over a lantern in the O’Leary family barn at 137 W. DeKoven St in Chicago, Illinois, causing the barn to catch on fire. The fire then spread to a wooden shed next to the barn. Not only were the barn from which the fire originated and the subsequently engulfed shed constructed from wood, but practically the entire city of Chicago. From wood was built more than two-thirds of the city’s structures, mostly in the style of balloon frame construction, topped with a tar and wood-shingled roof making them particularly susceptible to combustion. Not only were buildings erected with wood, but even many roads and sidewalks. In 1871, Chicago was made out of wood.
Forsaken by only one inch of rain in the preceding four months and a cutting southwest wind, the fire spread rapidly towards the center of the city. To complicate matters, watchman Matthias Schaffer mistakenly sent the initial response to the fire to the wrong location, letting it spread unbounded. Additionally, an alarm sent from the location of the origin of the fire didn’t register at the courthouse where the fire watchmen were stationed, and firefighters were already tired from having fought a number of smaller blazes the week before. Everything that could have gone wrong seemed to do just that.
At the time that firefighters finally arrived to the blaze, it had already claimed several buildings close to its origin. Kicked in the side by the spurred boot of a south-western wind, the undulating flames quickly galloped towards the city center. It then leaped across the famous Chicago River around midnight, landing on the roof of South Side Gas Works. The further proliferation of the fire disabled the city’s water system, rendering the efforts of the 185 firefighters and 17 horse-drawn steam pumpers fighting the blaze more difficult. After the blaze had finished ravaging the city, it began to rain on the evening of the 9th of October 1871.
All told, the Great Chicago Fire reduced more than 2000 acres of the city to smouldering rubble, killed as many as 300 people, caused $222 million (more than $5 billion today) in property damage, and left one-third of the city’s population homeless. In the succeeding two weeks, martial law was declared in the city to maintain order in the face of thieves and rioters. It was later lifted and donations flowed in from London to New York, and it was time to rebuild the city.
Among others, the architect of Central Park in New York City Frederick Law Olmstead posited that the building practices of the city had to be improved.
“Chicago had a weakness for "big things", and liked to think that it was outbuilding New York. It did a great deal of commercial advertising in its house-tops. The faults of construction as well as of art in its great showy buildings must have been numerous. Their walls were thin, and were overweighted with gross and coarse misornamentation.”
Near immediately, the fire code for buildings constructed within the city was rewritten, made sure of by insurance executives and a burgeoning movement of fire-preventionists. Also developed was one of the country’s leading municipal fire departments. Other relief efforts included bolstering the weakened economy of the city against price gouging by setting the price of a 12-ounce loaf of bread at 8¢, banning smoking, limiting the hours of saloons, and forbidding wagon drivers from charging more than their normal rates.
The first load of lumber purposed for the rebuilding of the city of Chicago was delivered the same day that the last burning building was extinguished. Twenty-two years later, 30 million people marvelled at the Chicago World Fair, a magnificent 200 building and 690 acre display of industrial prowess and neoclassical architecture. A few short decades after it was devastated, Chicago was named the Paris of the Midwest.
A Portrait of Rebirth
Sam Bankman-Fried was arguably the foremost representative of crypto in the world, and by him we have been betrayed, humiliated, and deceived. He gambled and maneuvered with user funds in an unconscionably negligible manner, in this severely delegitimizing our space and further tarnishing our already tenuous reputation. With the implosion of FTX and Alameda Research, SBF joins a regrettable cohort of Icarus-analogs this YTD alone: Do Kwon’s Terra Luna, Su Zhu and Kyle Davies’ 3 Arrows Capital, and Celsius, among others. In light of this smattering of financially ruinous blowups, it’s safe to say that the Great Crypto Fire has endured for about a year now. Although I won’t follow in their footsteps, I understand why some are choosing to leave crypto on the grounds that this kind of cataclysmic event seems to keep happening, and we don’t seem to learn from it.
With that said, we have something to thank the newly disgraced Sam Bankman-Fried for: a clear, highly visible reminder of why we must renew our stewardship of the principles upon which crypto was founded: decentralization, trustlessness, and transparency. While the implosion of FTX/Alameda was certainly in part attributable to egregious and predatory business practice, there’s a reason why they prioritized the repayment of their DeFi loans while shirking their CeFi counterparts. Namely, because everyone could see them. This inherent means of accountability within DeFi forced a deceptive and reckless actor to proceed fairly, and will force the same behaviour from institutional and retail actors alike in a version of crypto’s future where DeFi is prioritized mandated.
Reputation is hard-won, and easily lost. At present, the overall reputation of crypto is all but lost. Our very public disgraced figurehead who was testifying to Congress a short time ago railing against the very practices that he engaged in has now imploded the second largest exchange in the space. Really, it is hard to get much worse than that. Further, evident through many tweets of varying degrees of despair, anger, and perplexion, even our own people are packing their bags. I must say that my heart dearly goes out to those who lost funds, and it is my utmost hope that they can find the resilience and strength to come back from those losses. To anyone in a dark place, know that no matter how much money you lost, or how much time you spent making the money that you lost, your worth is not dictated by the digits that appear when you open MetaMask or your banking app. It is in fact infinitely beyond your comprehension, and is not something to be taken lightly.
All of this is to say that often in history, from the smouldering ruins of catastrophe emerges a new, superior iteration of what was lost. In the face of an ~80% drawdown in price, institutional actors collapsing left and right, and a massive loss of interest, some of us are still here. If you are, it is more likely than not that you are an adherent to the founding principles of crypto: decentralization, trustlessness, and transparency. For a better future, those who remain must rebuild the space in the image of these very principles, and reaffirm them to users new and old every step along the way. It has to be DeFi.
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Any views expressed in the below are the personal views of the author and should not form the basis for making investment decisions, nor be construed as a recommendation or advice to engage in investment transactions. As always, please do your own research. This is not financial advice. Every strategy is not for everyone. Each investor needs to understand what is right for them.
Crypto writer. Twitter: @0xbidder