Welcome to The Ask, where each week Crypto Investor interviews essential voices doing the work to make crypto 'mainstream.' Exchange lightly edited.

This week, editor-in-chief Michael Bodley spoke to Sam Bankman-Fried, founder and CEO of cryptocurrency exchange FTX. FTX and its U.S. affiliate, FTX.US., has been on a growth tear. This is part one of a two-part conversation with Bankman-Fried. It has been lightly edited for clarity

Bankman-Fried said his company plans to hire one to two hundred additional employees in the next year, among other growth ambitions. 

The concept of alpha decay, which you’ve talked about before, is a constant in crypto. Have crypto markets become more efficient since you first started trading the space?

Certainly, they are a lot more efficient, I think. You know, a lot of that is just that there are more liquidity providers now then when I first got into crypto. Very few of the top firms were really doing anything in this space. I think by now a number of the market-makers are out there (and there’s so much more competition. I think that's just made things a lot more efficient.

How have you scaled the trading business as competition has grown? If alpha decay is so rapid, so is your edge when it comes to differentiation as an exchange, right? How has that evolved over the last couple of years?

I think that there is some truth to that, and I think it's basically that, you know, a few years ago, the exchange space was in a pretty bad state in crypto. And there's just the product for exchanges to to able to keep up with what they're being asked to do. 

From that perspective, this was a really immature space. I think it is still an immature space, but less. You know, I do think that the exchange space has gotten substantially more efficient, over the last year or so, just as more sophisticated players have gotten into this space, and, you know, as more sophisticated exchanges have. And so I think that that's been going on and it mirrors some of what's happened on the liquidity side.

From a talent perspective, what has changed with recruiting at FTX since the last crypto bear market?

It's gotten a ton easier to hire because there are ... just a lot more people excited to be getting involved in crypto right now than there were, you know, there were a year or two ago, and, and that is a really, really remarkably big difference. And I do think that that's helped us and a lot of other people in the space grow out their workforces that there are just so many more people interested in it. Now, of course, there's also a little bit of a crunch, because everyone's trying to hire them.

And it's not true that it's gotten easier for everyone to hire in the space, but I think that there's a lot more demand and also a lot more supply. And so if you're in a position where you're sort of like one of the more exciting places to work, then I think that you're sort of the beneficiary of that. Because to the extent that you can have your pick of people, there's more people to have your pick from now. Whereas, I think it's a lot less true if you're just sort of like, you know, sending a market order (with less personalization.)

Does it become a compensation question at some point or does it become more one of culture and fit? Everyone at a certain level in crypto has the money to shell out for top talent, right?

It's super interesting and it's actually a little bit weird, because different people are looking for very different things right, in terms of compensation. And that's sort of what you see in the end is that like a lot of this ends up depending on how excited someone is about the prospect and how much trust and faith they have in it ... say whatever you will about compensation, but it's basically always the case that your upside is way higher (in a place that) does well and treats their employees well.

We've tripled in the last year and you've gone from 30 people to 100, which feels like a ton to us and as much as we can possibly, you know, manage right now. It's gonna' take a little while to process people.

I mean we're certainly doing a lot of hiring, you know that's going to keep up, but hopefully only at the rate that that we can actually manage it, and so do I think we're going to probably hire another one or 200 people in the next year is my guess.

….Sometimes companies are doing great. And when that happens, they try and really press their edge often which makes sense. And they do that. And, you know, obviously you want to scale the business as much as you can and a piece of that is scaling the workforce. But what we see happening a lot is sort of careless scaling of the workforce, where the priority seems to be hiring as many people as possible on the ground.

But I think what actually ends up happening is that if you do it sort of carelessly, even if you're hiring good people individually, right... If you don't have the capacity to manage and onboard those people and integrate them into the company and the culture, you end up losing that.

You lose that culture when you do it, and what you're left with is a company that was doing great now has a ton of people, and the median person has no idea what the fuck they're doing.

And no one has any idea what to do with them. No one has any idea, even though there's so much to do. And so many people to do it with, you know, There's a failure of a matching problem there.

A future of crypto question: will there be more consolidation in the space and that you will see more Goldman Sachs/mini investment banks for crypto that offer custody and trading and crypto and cap-intro? Or do you see more of a future in specialized solutions?

I'm gonna’ be honest, I'm not convinced that some of these businesses really make sense in, in the real world either outside of crypto. Other than that is historically how things have worked. And so I'm sort of a little bit skeptical that you'll see exactly the same systems evolve in crypto. And I think there have been a lot of people who have tried to do that and I think maybe a really interesting case to look at here.

(Take) Circle (for example), where they sort of started out as a crypto trading desk, right — was doing pretty well. And then they sort of started to morph into like the Goldman Sachs of crypto so to speak. And I think that didn't do so well for them. Like, that was low-grade. And I think part of what happened was like they're trying to become the Goldman Sachs.

...And that actually doesn't really provide much value if you don't already have a bunch of people who are defaulting to using you forever. And then, I think they sort of refocused and went back to AI, to building great products, And you know focused on USDC and payment rails, and obviously they've had a great year and been rejuvenated.

And so I think that’s one microcosm of that where a lot of people have tried to build the Goldman Sachs of (crypto). But I think, especially if you haven't had, you know, decades to build up every piece of this, they're sort of trying to do that on the fly, right, and the risk is you just do a mediocre job at everything.

Welcome to The Ask, where each week Crypto Investor interviews essential voices doing the work to make crypto 'mainstream.' Exchange lightly edited.

This week, editor-in-chief Michael Bodley spoke to Sam Bankman-Fried, founder and CEO of cryptocurrency exchange FTX. FTX and its U.S. affiliate, FTX.US., has been on a growth tear. This is part one of a two-part conversation with Bankman-Fried. It has been lightly edited for clarity

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