Like many people in the cryptocurrency industry, Sam Bankman-Fried is in it for the money. As founder of the quantum trading company Alameda Research, the FTX exchange and the DeFi serum protocol, the 28-year-old man with curly hair has amassed a $10 billion fortune in the sector in just three years.

Unlike most people in the cryptocurrency industry, he’s building a fortune to give half of it away. He is an effective altruist who essentially steals from the rich to give to the poor through his supernatural, coded trading strategies.

Maybe without the robbery, he says. Ultimately, my goal is to have as much impact as possible, whatever that may be. And right now, I think, it’s through donations, so I’m wondering how I can do as much as I can and give as much as I can.

The SBF, as it is sometimes called, has been around for some time. He was director of development for the Center for Effective Altruism for a few months in 2017, and before that he spent half his income working on Wall Street. He plans to donate about 50% of his crypto billions, but only after he reinvests in his ever-growing empire.

Nevertheless, he donates to charities as they arise. He was the second-largest contributor to President Joe Biden’s campaign, behind former New York Mayor Michael Bloomberg, who contributed $5.2 million.

I was excited about the impact this could have. I thought what happened in the election was important.

In addition, the FTX Foundation has recently been established. It donates 1% of the cost of the platform and will double user donations, dollar for dollar, up to $10,000 per day. In its first weeks of operation, the foundation has raised more than $2 million, mostly in the form of donations from users, who can choose from a carefully curated list of charitable organizations.

Old pouffe

SBF’s growing notoriety was further enhanced when the company was included in this year’s Forbes 30 Under 30 financial list. I’m honored, he says. I usually look forward more than backward, so it was a little cool, but it went pretty fast.

It also ranked third in a recent Top 100 ranking.

He has been known to sleep on an ottoman chair in his Hong Kong office so as not to miss a deal. It seems that the main reason SBF earns more than anyone else is that it is almost never off-schedule.

I’m in the office, mostly 24 hours a day. Sometimes I just take a nap on the ottoman here and of course I talk to colleagues and sometimes people on the internet, but it’s mostly his job.

He has no girlfriend and doesn’t have many contacts outside of work, although he does find time to talk to his family in the United States on the phone several times a week. It’s safe to say that FBS’ers aren’t the kind of people who are desperate for a perfect work-life balance, or even accept that their productivity declines after the first 11 hours of work.

I think these kinds of stories are vastly overrated, and the cruel or inspiring truth, depending on how you think about it, is that the more you put in, the more you get out, he says. That motivates me, and that’s satisfying, but you know, another part of it is how I think I can have the biggest impact.

How did I get here?

The child of two law professors at Stanford University, SBF discovered the Effective Altruism movement while studying physics at MIT.

Made popular by philosophers and ethicists including Toby Ord and Peter Singer, the movement focuses on pragmatic ways of helping others, using science and reason to maximize benefits rather than the well-intentioned and mediocre results typical of some charities. This practical approach also extends to how best to help a person.

Imagine how much good you can do by working directly for a cause, compared to what you can do by working and donating to Wall Street. In many cases, you could probably help them even more with donations. So, basically, I checked out Wall Street.

Fellow interns at quant trading firm Jane Street Capital pointed him in the direction of Wall Street, and he began working there just after graduating from college in 2014. Why did they hire a physicist with little experience in finance straight out of school, you ask?

It turns out that strategies for quantum trading are valuable trade secrets, which means that effective strategies are not taught in university courses. Instead, companies hire people with raw talent: Mathematicians or people with extensive experience in physics or computer science.

What you need to know about the markets, they will teach you, he says. He has traded various ETFs, futures, currencies and stocks and has developed an automated OTC trading system. There, he became interested in the incredibly profitable arbitrage opportunities in inefficient crypto markets and founded the crypto-quantum trading company Alameda Research in late 2017 to take advantage of them.

Rules applicable to all whales

Alameda Research has grown into one of the largest crypto firms with about $2.5 billion in assets under management, although as with its own assets, SBF puts this into perspective with some caveats about liquid and illiquid assets.

Alameda is the Moby Dick of cryptocurrences, representing up to 10% of cryptocurrences circulating in the markets at any given time. I think sometimes he can get to that part of the volume, he says. I think the average is a little lower. It belongs to the group of five to ten large commercial companies in this sector.

This means that every Alameda transaction has the potential to move the markets and generate liquidity. Last October, Alameda was widely accused of having caused the IFJ’s share price collapse by short selling, although SBF minimized the impact of this practice. He believes that with great power comes great responsibility.

It’s an absolute responsibility, he says, adding that he tries to follow the approach of TradFi Quant’s companies. Their job is to find profitable companies, but also to provide liquidity and promote healthy markets, he says. The greatest responsibility is to do no harm. And to ensure that what you do generally promotes, rather than disrupts, the liquidity of healthy markets and the efficiency of transactions.

He added that arbitrage operations, for example, can have a positive effect because they make markets more efficient and reduce prices where there are premiums. Identifying and developing opportunities to profit from arbitrage transactions was the main reason for founding Alameda. One of the first big gains we made was Litecoin, he recalls.

There was a week in late 2017 when Litecoin was trading at a steady 20% price on the GDAX Coinbase [now Coinbase Pro]. That’s cool, you make 10% every half hour, I guess you make dollars forever? And that, of course, is not the solution.

It proved terribly difficult and necessary to use this facility to circumvent the trade size and withdrawal limits of one million per day. A few years ago in crypto-economics, a big part of the problem was finding the logistics, he says.

In another arbitrage transaction, SBF and its friends moved up to $25 million a day through a series of intermediaries and land banks in Japan to take advantage of Kimchee’s infamous bonus, which allowed Bitcoin to be traded up to a third more in South Korea’s hard-to-reach financial system than in the United States.

But it is the management of the outdated financial system that has caused the biggest problems. The slowest and most difficult, most expensive and frustrating part of arbitration is the fiat, he says, referring to the difficulty of getting accounts that can then be closed at any time, archaic procedures and bureaucracy, and incredibly slow bank transfers.

We worked in physical bank branches for five hours a day for over five months because it took a long time to transfer money, he says, adding:

It’s like arriving at 10am and staying there with a few people until 1pm to make all the appointments we had to have every damn day of the week to send the same recommendation we sent yesterday.

This is one of the reasons SBF is so passionate about the DeFi – its vision is to one day replace the existing financial system, which is already too cumbersome. The current payment rails are not efficient at all, he says. There are billions of companies that just abstract it, and you end up with this incredibly complicated web of shit to make it usable for most people. They work on older systems that were not even designed for the Internet.

Effects of cryptography

For many, the SBF did not become an important figure in cryptography and DeFi until the mid-1920s, when it began to have an impact on Twitter crypto. It was an intentional gesture: He would have liked to have stayed under the radar in 2018 as Alameda focuses on quota trading: Very little advertising is required, which is usually a disadvantage. But when he launched FTX, an innovative cryptocurrency exchange system, in 2019, he had to create a community around it, and he took the lead in becoming its public face on social media.

As regards FTX as a retailer, the following rules apply: The more customers, the better. You can develop the best product in the world, but if no one knows about it, it’s worthless, he says.

One of the most challenging and interesting tasks was finding ways to engage users, and a large part of this task was awareness raising.

He seems to have understood this, as the FTX is now the fifth largest derivatives exchange by volume, with a valuation of $3.5 billion. The company has launched a number of innovative markets, including offering token shares to companies like Tesla, Apple and Amazon, as well as trading on Coinbase prior to its IPO.

She is also using her wealth and influence to try to overcome what she sees as the biggest obstacle to widespread WiFi adoption. He believes that Ethereum, including Eth2, is not sufficiently sized for cryptography and DeFi to replace the existing financial system. Currently, DeFi can process about 10 transactions per second, and Layer 2 solutions offer several thousand TPS.

It’s an absolutely solid and immutable barrier to growth, he says. The Fay literally cannot develop as an ecosystem until this problem is resolved. That’s why there is no long-term plan that doesn’t address this problem. …it’s just deadly. Even the Eth2 target of 100,000 GST is not enough for what the SBF has in mind.

If your goal is to reach 100 million or a billion users, […] the application should be able to process about a million transactions per second to become one of the biggest applications in the world. So you can endlessly tick off the list without having to consider other factors, with a scaling solution that will not lead you to your goal.

This has led him to become one of the strongest proponents of Solana, a retail chain that currently handles 65,000 TPS and which the team claims could eventually reach amazing levels : 710,000 TPS on a 1 gigabit connection or 28.4 million TPS on a 40 gigabit connection.

In August 2020, he founded Serum DEX on Solana and launched SRM Cryptocurrency. Bankman-Fried says you can see the benefits of Solana in whey by the order book. The matching engine takes only a hundredth of a cent to place an order, and auctions take only a few seconds.

So get lots of juice from the higher flow. And that has really helped to broaden the product base. So much so that I think our best estimate is that Whey DEX probably consumed more transactions in six months of operation than the entire Ethereum store chain ever did.

Network effects have given Ethereum a hard time, forcing deFi projects and users to migrate to Solana. Even after Chief Nomi handed over control of SushiSwap to him, he was unable to convince the community to hand him over. In the end, it was much more complicated than we thought to migrate existing projects and much easier to create new ones, he explains, adding :

We would be very happy if they had an outpost on Solana. I think they still will at some point. But I also think Seren will go both ways. Ultimately, I want better products and better users, you know, no matter what.

(After our interview, there was a new proposal to build a version of SushiSwap on Solan and Whey, perhaps under the name Bonsai).

While the SBF argues that the network effects of many interconnected applications built on Ethereum are significant, it notes that each project will eventually need to migrate and dismantle assemblies and toolsets with existing options to move to Layer Two, Eth2 or another scalable solution. As for the number of users, he claims that the effects of the ETH network are overestimated.

The other part is that while DeFi’s current user base is very loyal, very large and powerful, it is not very large. The daily active users, I think it’s tens of thousands. I think FTX probably has more active daily users than all the DeFi’s combined.

It appears that SBF is considering implementing the Solana blockchain as infrastructure in applications where it is invisible to most users, to allow millions of users to access the DeFi. In early 2021, Alameda did a $50 million funding round to implement DeFi type tools on Maps.me, an offline European mapping application with 140 million users. Solana will build a multi-currency portfolio with exchange rates and locations. FTX’s purchase of Blockfolio could follow a similar strategy.

I think it will be a very cool product and a powerful suite of products for the application, he says of Maps.me. I’m very excited. I think this could be the start of adoption.

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