Visualizing the New Cryptocurrency Economy
Over a decade ago, the birth of Bitcoin sparked a revolution in the digital world — and just last year, the number of active cryptocurrencies jumped from roughly 1,600 to over 3,000 worldwide.
Cryptocurrencies have now evolved past simple digital currencies, offering solutions to meet the complex needs of modern financial markets.
Today’s graphic from Abra visualizes the complex, ever-evolving cryptocurrency ecosystem and its real-world applications.
Characteristics of Cryptocurrencies
Why are cryptocurrencies important for the future of digital finance?
Drastically reduces fees and processing times due to a lack of cross-border restrictions
Prevents governments or major institutions from blocking financial activities at whim
- Greater financial control
Individuals can have total control of their funds
- Greater security
Prevents fraudulent alterations from third parties
- Lower costs
Lower transaction fees thanks to fewer third parties
- Greater Accessibility
Reduces or eliminates traditional barriers to capital markets
Much like the internet has forever altered how we live and work, cryptocurrencies have the potential to change how people participate in global financial markets.
Categorizing the New Crypto Economy
Today’s cryptocurrencies go beyond replacing cash. This new token-based economy is evolving─with unique solutions emerging in finance, security, identification, social engagement, and ownership.
Cryptocurrencies are generally categorized by their primary application within the ecosystem:
Digital cash can be used for both ecommerce and brick-and-mortar retailers
- Store of value
New form of scarce native currency and a means of settlement
- Programmable money
Borderless money that enables easy conversion between currencies
Crypto version of fiat which is tied to the value of resources like gold or the U.S. dollar
Private digital transactions, with some offering anonymity
- Digital ownership
Digital handling, storage, and monetization of data
- Decentralized utilities
Crypto-enabled networks, products, and services that exchange between assets
- Alternative finance
Digital assets such as collectibles, commodities, and tokenized securities
Cryptocurrencies are adding both value and utility to the digital economy, and to the global financial market as a whole.
Applications of Cryptocurrencies
Because cryptocurrencies are programmable, customizable computer code, developers can design and adapt them for many use cases within the digital economy.
How are these various cryptocurrencies being used in everyday applications?
- SPEDN auto-converts crypto to fiat for merchants, reducing exchange rate risk while offering convenient customer payment options.
- Slice offers real estate investing to anyone for as low as $10,000 through fractional investment.
- CyClean plans to launch a blockchain-enabled electric vehicle (EV) fleet that mines crypto as users travel—reducing emissions and rewarding users for doing so.
- Digital construction platform Builderium connects contractors to clients around the world through blockchain, opening up a global marketplace of potential deals.
These are just a few of the ways cryptocurrencies are breaking down barriers for people and companies worldwide—allowing them to grow personal wealth and enter the global market.
The Growth of the Crypto Economy
Worldwide, the numbers show that blockchain-based technology and cryptocurrency use is growing. Blockchain wallet users rose from nearly 9 million in 2016 to over 42 million in 2019.
Developers produced a mere 100 decentralized apps (DApps) in 2015─with that number skyrocketing to over 3,100 by 2019.
Overall, cryptocurrencies are helping to create an innovative and accessible financial system around the world.
Cryptocurrency deserves an opportunity to find a sustainable future in our economy.
—Adena Friedman, President & CEO of NASDAQ
While the future of the new cryptocurrency economy is still taking shape, one thing is certain─cryptos are forever altering the way we view and measure the value of money.
Visualized: FTX’s Leaked Balance Sheet
As Sam Bankman-Fried’s crypto exchange FTX files for bankruptcy, this graphic visualizes FTX’s balance sheet leaked by the Financial Times.
Visualizing FTX’s Balance Sheet Before Bankruptcy
In a difficult year for the crypto space that has been full of hacks, failing funds, and decentralized stablecoins going to zero, nothing has compared to FTX and Sam Bankman-Fried’s (SBF) rapid implosion.
After an astronomical rise in the crypto space over the past three years, crypto exchange FTX and its founder and CEO SBF have come crashing back down to earth, largely unraveled by their misuse of customer funds and illicit relationship with trading firm Alameda Research.
This graphic visualizes FTX’s leaked balance sheet dated to November 10th, and published by the Financial Times on November 12th. The spreadsheet shows nearly $9 billion in liabilities and not nearly enough illiquid cryptocurrency assets to cover the hole.
How did FTX wind up in this position?
How FTX’s Bankruptcy Unfolded
FTX’s eventual bankruptcy was sparked by a report on November 2nd by CoinDesk citing Alameda Research’s balance sheet. The article reported Alameda’s assets to be $14.6 billion, including $3.66 billion worth of unlocked FTT and $2.16 billion of FTT collateral.
With more than one-third of Alameda’s assets tied up in FTX’s exchange token FTT (including loans backed by the token), eyebrows were raised among the crypto community.
Four days later on November 6th, Alameda Research’s CEO, Caroline Ellison, and Sam Bankman-Fried addressed the CoinDesk story as unfounded rumors. However, on the same day, Binance CEO Changpeng Zhao (CZ) announced that Binance had decided to liquidate all remaining FTT on their books, kicking off a -7.6% decline in the FTT token on the day.
Back and Forth with Binance’s CZ
While Ellison publicly offered to buy CZ’s FTT directly “over the counter” to avoid further price declines and SBF claimed in a now-deleted tweet that “FTX is fine. Assets are fine.”, FTX users were withdrawing their funds from the exchange.
The next day, the acquisition fell apart as Binance cited corporate due diligence, leaving SBF to face a multi-directional liquidity crunch of users withdrawing funds and rapidly declining token prices that made up large amounts of FTX and Alameda’s assets and collateral for loans.
FTX’s Liabilities and Largely Illiquid Assets
In the final days before declaring bankruptcy, FTX CEO Sam Bankman-Fried attempted a final fundraising in order restore stability while billions in user funds were being withdrawn from his exchange.
The balance sheet he sent around to prospective investors was leaked by the Financial Times, and reveals the exchange had nearly $9 billion in liabilities while only having just over $1 billion in liquid assets. Alongside the liquid assets were $5.4 billion in assets labeled as “less liquid” and $3.2 billion labeled as “illiquid”.
When examining the assets listed, FTX’s accounting appears to be poorly done at best, and fraudulently deceptive at worst.
Of those “less liquid” assets, many of the largest sums were in assets like FTX’s own exchange token and cryptocurrencies of the Solana ecosystem, which were heavily supported by FTX and Sam Bankman-Fried. On top of this, for many of these coins the liquidity simply wouldn’t have been there if FTX had attempted to redeem these cryptocurrencies for U.S. dollars or stablecoin equivalents.
While the liquid and less liquid assets on the balance sheet amounted to $6.3 billion (still not enough to equal the $8.9 billion in liabilities), many of these “less liquid” assets may as well have been completely illiquid.
Relationship with Alameda Research
When looking at FTX’s financials in isolation, it’s impossible to understand how one of crypto’s largest exchanges ended up with such a lopsided and illiquid balance sheet. Many of the still unfolding details lie in the exchange’s relationship with SBF’s previous venture that he founded, trading firm Alameda Research.
Founded by SBF in 2017, Alameda Research primarily operated as a delta-neutral (a term that describes trading strategies like market making and arbitrage that attempt to avoid taking directional risk) trading firm. In the summer of 2021, SBF stepped down from Alameda Research to focus on FTX, however his influence and connection with the firm was still deeply ingrained.
A report from the Wall Street Journal cites how Alameda was able to amass crypto tokens ahead of their announced public FTX listings, which were often catalysts in price surges. Alongside this, a Reuters story has revealed how SBF secretly moved $10 billion in funds to Alameda, using a bookkeeping “back door” to avoid internal scrutiny at FTX.
While SBF responded to the Reuters story by saying they “had confusing internal labeling and misread it,” there are few doubts that this murky relationship between Alameda Research and FTX was a fatal one for the former billionaire’s empire.
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