Why the cryptocurrency sector must eradicate the cult of personality

“Look, I messed up.” So shrugged Sam Bankman-Fried, better known as SBF, as he tried to explain how FTX contrived to lose $8 billion of customer funds.

For viewers of the November 30 interview with Andrew Sorkin, it was fluffy and farcy stuff — not because SBF had anything plausible or remotely coherent to say, but because it was car-crash television.

And mainstream media seemingly can’t get enough of this endorphin-tickling stuff. If there is one thing the fluff media loves, it is a hero-to-zero story … followed by a season-long redemption arc.

First, we build up our leaders into messianic beings. Then, we knock them back down, elect a replacement and repeat ad infinitum.

In Mr Bankman-Fried, the industry has met its ​​bete noire — a devil whose every stumble must be watched through the cracks in the fingers of one hand while shovelling popcorn with the other.

As the adage goes, never become the main character in the crypto show. It doesn’t end well. This season’s entertainment has been courtesy of Mr Bankman-Fried and his merry band of hyper-stimulated hangers-on.

While there is every reason for the cryptocurrency industry to be simultaneously transfixed and repulsed by his actions, it is a behaviour that needs to stop.

Until people in the industry stop worshipping idols with feet of clay, they will continue to be led astray by glib grifters.

No matter how true their intentions (for even Mr Bankman-Fried must have acted in good faith once), fallible men will inevitably fall, and when those men are responsible for the digital assets of millions, the collateral damage is colossal.

In cryptocurrency, the real rewards come to those that focus on building decentralised networks and drive adoption.

Communities are extremely important. If you don’t serve your community, you will be ousted, as Mr Bankman-Fried was.

We should not be glorifying or spending any more time on corrupt, deceiving, lying people.

It is important that, as an industry, we get back to building decentralised networks and awesome products, and reward those that are building efficient, decentralised, transparent and inclusive solutions.

Every political revolution — from both sides of the spectrum — has been hamstrung by its creation of strong leaders.

The financial revolution instigated by the Bitcoin white paper in 2008 is playing out the same way: a promising idea impaired by the people overseeing it.

There is something about human nature that compels us to put people on pedestals. Then, when they stumble, we join the mob in administering a well-deserved kicking.

Finally, having vowed never to make the same mistake again, we promptly forget everything we have learnt.

The moment another smooth-talking salesman rides into town promising to cure all our ills with his peculiar brand of snake oil, we swoon.

Mr Bankman-Fried, Caroline Ellison, Alex Mashinsky, Su Zhu, Kyle Davies, Do Kwon, Barry Silbert — none of the protagonists from this year’s drama have emerged with their reputations untarnished.

Cryptocurrency wasn’t meant to have strong leaders. Which is why the anonymous founder of the movement, Satoshi Nakamoto, did his bit to secure its survival and then exited the stage.

Desperately seeking Satoshi Nakamoto

Bitcoin’s creator knew that it was better to fade away than to burn out.

No ignominious “gotcha” moment in which the lead character’s sins are laid bare; only a slow slink into obscurity, never to be heard from again.

Before he left us, though, Mr Nakamoto said: “The root problem with conventional currency is all the trust that is required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust.”

“Banks must be trusted to hold our money and transfer it electronically, but they lend it out in waves of credit bubbles with barely a fraction in reserve. We have to trust them with our privacy, trust them not to let identity thieves drain our accounts.”

Watch: what is Bitcoin and how did it start?

He could not have known that 12 years later, cryptocurrency would be running its own fractional reserve system and defrauding its customers in the same way as the central banks it was designed to replace.

Mr Nakamoto may have faded into the background but Mr Bankman-Fried flew too close to the flame. And then he burnt to a crisp, taking the whole building down with him.

The sooner cryptocurrency can get away from its cult of personality, the sooner it can become the censorship-resistant, shock-impervious, honey badger-esque decentralised juggernaut it was always meant to be.

A leaderless cryptocurrency community is not the stuff that Netflix box sets are made of. But what the industry may lose in bingeability, it will more than make up for in financial stability.

Trust no one. Idolise no one. Be hoodwinked by no one. It is really not that hard.

Stefan Rust is the founder of Laguna Labs, a blockchain development house, and former chief executive of bitcoin.com

Updated: December 07, 2022, 4:00 AM