The first time Decrypt interviewed FTX CEO Sam Bankman-Fried, in September 2020, decentralized marketplace SushiSwap was better known than the 29-year-old billionaire or the crypto exchange he founded. He rose to fame initially through his efforts to save the SushiSwap protocol, after its creator cashed out.
In the intervening months, Bankman-Fried has overseen a $900 million raise for FTX, with investors including Softbank, Sequoia, and Third Point; FTX’s value has soared from $1 billion to $18 billion, and the young entrepreneur has been feted by every major financial publication in the world, with the likes of the Financial Times breathlessly reporting his purported plans to buy Goldman Sachs.
FTX and its new shopping list of acquisitions, as well as expansion within Asia and the US, takes up most of Bankman-Fried's time. But SBF, as he’s affectionately known, is also one of the few crypto luminaries straddling decentralized finance (DeFi) and its mainstream equivalent. That gives him a unique take on the emerging DeFi space—its advantages, as well as the issues it faces.
He told Decrypt how he thinks some of these can be overcome in a wide-ranging interview last week.
FTX makes money from charging fees on crypto trades, and much of its success has come from its expansion into other areas, which include offering stocks and commodities via derivatives contracts. In developing the exchange, Bankman-Fried has strived to straddle both the traditional finance and crypto spheres.
“It's really important for me to have a really broad view of the crypto ecosystem and to understand what's going on in each piece of it so that we can effectively serve it and understand where the demand is,” he said.
This “we’re all in it together” approach has earned him plaudits from both the DeFi and TradFi camps, because venture capital and institutional culture is often the direct opposite of the financial egalitarianism DeFi proponents strive to achieve.
SushiSwap chef at slumber. Image: Sam Bankman-Fried
There’s still a huge chasm between the two, said Bankman-Fried. Unsurprisingly, he highlighted the lack of regulations as one of the big issues concerning institutional investors.
Despite this, DeFi money markets are increasingly appealing to VCs who see potential in their transparency and leverage opportunities. More than $95 billion is currently locked into the sector, compared to just under $1 billion last year.
But DeFi proponents fear that VC influence may damage the ecosystem.
One leading DeFi protocol, Compound, now has five VCs representing 42% of its token ownership—at the risk, some say, that it’s labeled a VC coin.
Fittingly, it’s SushiSwap that’s one of the experimental petri dishes for gauging the impact of institutional investment on DeFi. A proposal to attract VCs by offering them discounted SUSHI tokens would make it cheaper for them to guide the direction of the protocol. But the idea has sparked fresh controversy within the project's community.
The proposal suggests that around a quarter of the SUSHI governance tokens should be sold at a 20-30% discount if the buyers promise to lock up their tokens for 18 months. So far 21 investors, including Polychain, Dragonfly Capital and Hashed, are on board for the $60 million sale.