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Comment by paulusthe | Hacker News Reader

Sure, but at some point real dollars enter the financial equation, backed by these coins, none of which are probably priced correctly to serve as collateral.

The ftt coin is shady as hell though. A 40% trading rebate for holding $1m is insane; that's nothing. And it's not open to anybody touching the US - a blatant attempt to prevent US regulations, which would catch this stuff.

It's very weird for exchange owners to get rich overnight. That doesn't happen in real markets, and it seems to only happen in crypto when the exchange is using customer deposits as leverage (Celsius) or trading on their own account, which means against their customers (binance, probably ftx)

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Why would it be shady? Traditional exchanges like the CME have "seats" that entitle holders to discounts and are sold at hefty prices. FTT is simply a tokenized version of an exchange membership. It makes perfect sense, and is really no different than a Costco membership where paying up front allows you to buy in bulk at a discount.

The trading fees for crypto exchanges are also insane, which enriches the exchange operators.

If you think someone's leaving money on the table with high fees you should start your own exchange. Of course before you even got off the ground you'd have to register as a MSB, draft a very extensive compliance plan given the "high risk" nature of your industry, find a banking partner who will even consider accepting you and hopefully won't kick you out after you get too big (you may have to buy a credit union if this step doesn't work out), get a money transmitter license in every state except Montana (which by the way all require a substantial bond, application fees, and delays), find former regulators who are now $1500/hr lawyers who still have some influence at NY DFS in order to get approved in New York, get approved for ACH, spend at least $50k a month on Chainlysis and OFAC screening software in order to placate regulators, and of course you actually have to write the exchange backend too. If you want to offer leverage (you will in order to be competitive with other exchanges) you need to have a pretty sophisticated risk management system because liquidations in crypto don't work like they do anywhere else. And you have to pay a browser fingerprinting vendor $20k/mo too because your halfwit customers will get phished and cause you bad publicity if you don't stop it. You'll also need Onfido or some other identity verification company in order to satisfy 31 CFR § 1020.220. But yes, once it's all set up it's a practically license to print money.

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