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This is interesting. The hacker did not return the ETH, so the $320M has come from the deep-pocketed investors and VCs behind Solana/Wormhole. Interesting to n
by bigdaddyrabbit2 5y ago
This is interesting. The hacker did not return the ETH, so the $320M has come from the deep-pocketed investors and VCs behind Solana/Wormhole.
Interesting to note that the VCs are bailing out the retail users here, instead of the usual flow where taxpayers are on the hook for bailing out too-big-to-fail WallStreet banks.
- steelstraw 5y agoAn underappreciated improvement.
- tgv 5y ago> deep-pocketed investors Or people with a lot of ETH, that want to hold on to the value of the rest they still own.
- duxup 5y agoIf they didn't have the money / decided it was too much for them, they would just walk too.
- quartz 5y agoThere's precedence for this in the crypto space as well. In 2017 Coinbase famously reimbursed everyone [1] impacted by an ETH flash crash that pushed the price from $320 to $0.10. [1] https://techcrunch.com/2017/06/24/coinbase-is-reimbursing-losses-caused-by-the-ethereum-flash-crash/ https://techcrunch.com/2017/06/24/coinbase-is-reimbursing-lo...
- slg 5y agoThey aren't doing this because it is the morally right thing to do. They are doing it because they feel that the $320m is important to secure the value of their business, the Solana ecosystem (thanks for the correction arberx), and crypto in general. My personal interpretation of that, there are a lot of awfully rich people who are scared of the bubble popping.
- naraga 5y agothey are scared of bubble popping yet give away $320m. okay.
- arberx 5y agoSolana ecosystem* Exploit happened on Solana. Jump Trading has a vested interest in the Solana ecosystem and is effectively the sole market maker on it.
- lima 5y agoThere's a number of market markers besides Jump, like Alameda Research.
- benreesman 5y agoI think Wintermute and Efficient frontier also at least dabble.
- bigdaddyrabbit2 5y agoNothing happens in finance because it is "the morally right thing". It's all a game of incentives. Wall Street Banks take disproportionate risks because they are incentivized to do so. The interesting thing here is how the un-bailout-able nature of ETH affects the players in Crypto. Because ETH can't be magically printed, the VCs have to decide if they will walk away or bail out the retail end users. It looks like they decided to do the latter. This has happened more than once in Crypto - I can think of the Binance hack, where Binance bailed out the users. OpenSea has also been covering ETH lost by its users who had their Bored Apes stolen because of user mistakes. I wonder what it is about Crypto that causes large players to cover user loses. I need to learn more.
- latexr 5y ago> I wonder what it is about Crypto that causes large players to cover user loses. The answer is in the comment you replied to: > there are a lot of awfully rich people who are scared of the bubble popping. The value or cryptocurrencies depends on hype and on convincing the next chump that they should buy in. The large players have a lot of money invested which they will lose if the cryptocurrency value tanks because people lost trust. Covering user loses is itself an investment; it contains the damage by making the issue die down.
- rlt 5y agoIf that’s the case “restored” is an interesting way to put it.
- verdverm 5y agoI was thinking "replaced" is more accurate
- kordlessagain 5y agoI was thinking an "investigation" is in order.
- kwertyoowiyop 5y agoAnd the passive voice is telling.
- cbenneh 5y agoNot really bailing out retail. There was enough liquidity for retail users to exit the tokens at risk without a penalty. On the other hand the VCs themselves that are large owners of the tokens in Solana ecosystem would incur large losses, and that's excluding additional losses from reputation in future. It just shows how successful Jump VCs are when they put up $320M in a few hours. Maybe a month of their PnL?
- im_down_w_otp 5y agoI don't see how this is an indicator of that. They didn't put in USD. They put in ETH. Which is a thing that has no requirements to be backed by fungible legal tender reserves. So, they're not actually putting up cash as a replacement. It's more like they're putting up assets as a replacement, but it's not even that concrete really. They're not the same thing. They're trading in chits, not money, when things like this happen. At least that's the case for as long as you can't regularly and commonly transact in ETH. The spot price/value of ETH multiplied across all the ETH that exists doesn't seem to be a description of total USD (or EUR or whatever) reserves available to convert ETH to USD, et al. as far as I can tell.
- ludamad 5y agoYou overcomplicate things. There is plenty of liquidity to sell 120k eth; the opportunity cost of doing this is near $300 million
- antocv 5y ago2 days ago Jump had 93 000 ETH, today they do not have 93 000 ETH. By casting a spell, today they also have 93 000 extra ETH. They are saving some of their potions for later time to cast wider spells.
- ludamad 5y agoYour spell metaphor doesn't serve you being this handwavey. What are you even saying happened on the ethereum blockchain during this?
- keewee7 5y ago>instead of the usual flow where taxpayers are on the hook for bailing out too-big-to-fail WallStreet banks Why is there so much misinformation on the 2009 bank bailouts? The bailouts were loans and investments that became profitable for tax payers. >In total, the government has realized a $109B profit https://projects.propublica.org/bailout/ https://projects.propublica.org/bailout/
- defaultprimate 5y agoThis is a commonly repeated trope that is completely false and based on very questionable accounting. Namely the omission of opportunity cost and the comparison of static parameters to temporal parameters. https://mitsloan.mit.edu/ideas-made-to-matter/heres-how-much-2008-bailouts-really-cost https://mitsloan.mit.edu/ideas-made-to-matter/heres-how-much...
- NovemberWhiskey 5y agoWhat do you think that paper actually says? I keep seeing it cited as "no, this is how much the bailouts really cost!", but that's not what it's about at all and anyone who has actually read it cannot credibly come to that conclusion. It's about assessing the fair value of the bailout programs, at the time they were executed - i.e. the estimated net present value of the future cashflows under the bailout programs. The author argues that it unhelpful from a policy perspective to do an ex post analysis because it only describes what happened in this case, rather than what could've happened. i.e. when considering whether a bailout is good value, we should consider what happens if its unsuccessful. There is absolutely no doubt that the bailouts have been profitable for the government in terms of actual repayments.
- defaultprimate 5y agoFrom the abstract: "Drawing selectively on existing cost estimates and augmenting them with new calculations, I conclude that the total direct cost of crisis-related bailouts in the U.S. was on order of $500 billion, or 3.5 percent of GDP in 2009. [...] Those conclusions stand in sharp contrast to popular accounts that claim there was no cost because the money was repaid, and with claims of costs in the multiple trillions of dollars." From 3.1.3. See Wall's analysis of Fannie Mae and Freddie Mac for more detailed discussion of their bailout costs: "Treasury collected $147 billion from Fannie and $98 billion from Freddie. As explained earlier, interpreting this tally as a cost measure is conceptually flawed for several reasons. Wall (2014) also discusses the shortcomings of this approach, which has been used to argue that the government has been more than fully repaid and that value should be returned to the shareholders." From the conclusion: "Nevertheless, the total is large enough to conclude that the bailouts were not a free lunch for policymakers as some have claimed." What the paper is saying seems pretty clear to me: bailout costs have been inaccurately measured and reported popularly at both ends. It was neither unfathomably expensive, nor profitable to the tax payer. If you lend me $100 and I pay you back $107 you can declare you profited from the loan if you literally only look at the principal and repayment amount, but finance is not so simple, especially at a national level. Opportunity cost, inflation, depreciation, and numerous other factors exist. The total cost of you lending me $100 could have been significantly more than $107.
- arcticbull 5y ago> Interesting to note that the VCs are bailing out the retail users here, instead of the usual flow where taxpayers are on the hook for bailing out too-big-to-fail WallStreet banks. If you're referring to the 2008 bail-outs, those weren't grants, they were loans and investments. To date, beneficiaries have repaid more than the initial amount netting the government (and hence the people) a significant profit. $109B to date. And the expectation of significantly more to come. Talk about a good investment. [1] Fannie and Freddie alone received $191B and have paid $301B in dividends so far - and all the principal remains outstanding. [1] https://projects.propublica.org/bailout/ https://projects.propublica.org/bailout/
- papito 5y agoI hope this is not an argument for more bailouts. A lot of people walked away with riches while ruining the US economy. "I lost $100 but lookit I just got back $15" is not a win, it's just... less of a loss.
- panarky 5y ago> those weren't grants, they were loans and investments Those loans and investments weren't guaranteed to be paid back, the government took a risk. Assuming risk of loss is a valuable thing that gets traded all the time through futures, options, swaps and other derivatives. Those futures, options and swaps have a cost. The fact that the government gave away that value for free means it was a massive gift to Wall Street banks.
- NovemberWhiskey 5y agoI suppose it depends on exactly which program you're looking at, but since you mention Wall Street banks, I assume you're talking about the Capital Purchase Program. I don't think it's reasonable to say that this was given away "for free". If it was "free" then there wouldn't have been any over-recovery at all, would there? In the CPP, the government bought preferred stock in a number of banks (mostly not Wall Street ones, but whatever). That stock could've been worthless if the banks failed, but otherwise the banks were required to pay an annual dividend of 5% through 2013 and 9% thereafter; plus there was a whole host of supervision of their activities, including limitations on their ability to pay ordinary dividends.
- shrimpx 5y agoSomething similar happened in the WSB/GameStop fiasco where Citadel and Point72 bailed out Melvin Capital and its investors.
- somenewaccount1 5y agoHow is it interesting for them to fulfill their fiduciary responsibility to individual retail user? Banks do this all the time.
- jsnodlin 5y agoHow on earth do they have enough capital to replace $320 million? I seriously doubt it was entirely replaced.
- octoberfranklin 5y ago> so the $320M has come from the deep-pocketed investors and VCs If that had really happened there would be a txid, and people would be parading around an etherscan link. At the moment, this is no different from "funds are SAFU"