My wild ride into the cryptosphere – Financial Times


A few weeks ago, I went off to the races. Not the ones you might know, at Ascot or Churchill Downs. Instead, I signed up at Zed Run, an online horseracing platform, where I discovered just how easy it is to buy cryptocurrencies and crypto assets — and just how hard it is to get out.

I watched a few races on my computer to warm up. A dozen glistening equine avatars lined up at a neon starting gate and then — three, two, one — galloped down a space-age track, hooves pounding to techno music. No jockeys, no broken legs, just round-the-clock horseracing on the blockchain.

My first task was to create a virtual stable. I labelled mine “Life & Arts” and described it as helping to “provide essential news and analysis to ambitious individuals and companies around the world”. Then I signed up for an online auction called a “drop”, where I would bid for one of thousands of Zed Run horses, each unique in colour, name and bloodline. 

Here are the steps: register with a crypto exchange platform (such as Coinbase), link to a bank account and transfer money (using the financial app Plaid), buy ethereum (the second-largest cryptocurrency, known as ether or ETH), transfer ether to a crypto “wallet” (MetaMask), and then exchange ether for “wrapped” ethereum, or wETH, a version of ether that, at least for now, is more seamlessly tradeable via the common standard known as ERC-20.

Frank Partnoy’s digital horse ‘Tearaway Charlie’
Frank Partnoy’s digital horse ‘Tearaway Charlie’

If you haven’t traded crypto before, each step feels like a leap of faith. You might find it disconcerting that MetaMask’s software can “read and change all your data on the websites you visit”, or that anyone with your secret back-up phrase “can take your ether forever”. The bigger problem for me was that some of the steps would take too long. The horse drop was in five hours, not five days.

Fortunately, there’s a shortcut: use a credit card and pay a 5 per cent “slippage” fee. I clicked through terms and warnings, and a blue box confirming “I understand the risks”. The last step, converting ETH to wETH, took five minutes and required a fee called “gas”. After starting with $400, I had 0.1436 wETH, worth just over $350 at the time. It was a big cut. But I was ready to buy my first racehorse.

As a former Wall Street derivatives trader and a researcher who studies financial market regulation, I am often suspicious of financial innovation. The 2008 financial crisis reminded us that financial instruments can carry hidden dangers, and in March 2020 the markets nearly collapsed because of yet more complex bets by banks, until regulators flooded the global economy with cash. So I approach crypto markets, and the innovation there, with fascination, but also caution.

The crypto world can seem mystifying, but there are really only two main concepts: money and assets. Bitcoin, ethereum and wETH are just the latest iterations of fungible money. They are privately created versions of pounds or dollars in that they are both valuable and interchangeable.

In contrast, crypto assets are frequently non-fungible. They resemble other unique assets you own, such as collectibles. That is why they are labelled with the acronym NFT, for “non-fungible token”, a commonly used term in crypto. No Zed Run horse is exactly the same as the one I ultimately bought. 

Both cryptocurrencies and NFTs are rooted in the history of money and assets. The first fungible money is attributed to King Alyattes of Lydia, now western Turkey, around 600BC. He created coins from electrum and stamped them with pictures that acted as denominations. Animals were popular: a lion might be worth more than an owl or snake. Privately created currencies were vulnerable to government expropriation, as they are now.

BP5KK3 Lydian electrum third stater/trite gold coin (both sides). This coin in all likelihood was minted by King Alyattes in Sardis
A Lydian coin, most likely minted by King Alyattes, from around 600BC © Alamy
A Bored Ape. Different versions of the computer-generated cartoon change hands for thousands of dollars
A Bored Ape. Different versions of the computer-generated cartoon change hands for thousands of dollars

NFTs might seem new and esoteric, but they share features of early non-fungible assets. Instead of bartering with animal skins or salts, our ancestors might have paid for goods with a small dagger. An unusually shaped dagger was more valuable, a common one less so.

Crypto markets use technology to protect against government interference and to limit supply. In 2009, Satoshi Nakamoto (a pseudonym) created a secure computer-driven regime that guarantees slow and gradual creation of bitcoins; many other cryptocurrencies follow this approach. New money comes not from decisions by central bankers but from private computer farms that solve puzzles in order to manufacture new currency, using vast amounts of electricity. Similarly, private NFT founders create unique tokens and promise not to flood the market with new ones. Many people trust them more than they trust central bankers.

Place your bets: the volatility of crypto assets; % change on previous day

Cryptocurrencies are increasingly popular, and volatile, often fluctuating by more than 5 per cent a day. In a few hours on June 16, a cryptocurrency called Titan plummeted from about $60 a token, $2bn in total, to near zero. Stories of alleged hacks and exit scams known as “rug pulls” abound (just look up Safe Heaven, ShitCoin, or the thousands of examples at

As it becomes easier to participate in crypto markets — you can purchase bitcoin with a credit card or Venmo, and use it to buy Starbucks coffee or a Microsoft Xbox — we face two inevitable questions, political and personal. First, what, if anything, should governments do about crypto? Second, as an individual, are you in or out?

Zed Run is one of thousands of platforms offering NFTs, which then trade on peer-to-peer marketplaces such as OpenSea, the world’s largest. The items there feel like the collectibles you might have in your home: paintings, furniture, bonsai plants. 

Animal NFTs have been especially popular, starting with CryptoKitties, which were in vogue in 2017-18. When I visited OpenSea recently, Bored Ape Yacht Club ranked first in trading volume. Each computer-generated cartoon ape looks uniquely bored and comes with a yacht club membership and access to “The Bathroom, a collaborative graffiti board”. I watched one morning as Bored Apes changed hands every few minutes, thousands of dollars per ape. 

Jargon buster: a glossary of crypto terms

Bitcoin the most widely held cryptocurrency

Blockchain a timestamped list of records called blocks that are linked together using cryptography

Cryptocurrency a digital currency that uses cryptography and is therefore difficult to counterfeit

DeFi (decentralised finance) a blockchain-based form of finance that uses smart contracts instead of financial intermediaries

Discord a messaging platform where people commonly discuss crypto markets

ERC-20 a technical standard used in the ethereum blockchain

Ethereum (ether or ETH) the next most popular cryptocurrency, from the ethereum blockchain platform

NFT (non-fungible token) a unit of data that is certified as representing a unique digital asset

OpenSea the world’s largest peer-to-peer marketplace for trading NFTs

wETH a “wrapped” version of ethereum that is more seamlessly tradeable than ETH because it uses ERC-20

When I got bored, I switched to Arabian Camels, where one polka-dotted camel smoking a cigarillo was being offered, its hat emblazoned with “That’s so fintech”. The hat is rare — only 0.04 per cent of camels wear one — so this particular camel was in high demand, though not as much as the apes. Crypto ape prices are up sixfold since May.

The supply of crypto assets is typically capped. There are a mere 10,000 Bored Apes. Zed Run says it will release only 38,000 first-generation horses, called “Genesis” (though breeding is now allowed, so there could be a population explosion). The priciest horses are from the purest bloodline, called Nakamoto, a nod to the bitcoin creator. The most common breeds are labelled Buterin, after Vitalik Buterin, a co-founder of ethereum.

The uniqueness of each NFT is a big part of the draw. Each Bored Ape was generated from 170 possible traits, including expression, headwear and clothing. As the founders say: “All apes are dope, but some are rarer than others.” The Zed Run horses also come with different characteristics, but their unique racing potential is hidden, which makes them arguably even more dope than the apes.

I felt about as comfortable before the June 10 drop as I’d feel walking into a rager hosted by my students. Surveys suggest that crypto markets are most popular among millennials, and the average age of Zed Run participants appears to be about 30, based on YouTube, TikTok and broadcasts.

I consulted with one crypto guru and was warned that I would be bidding against thousands of people trying to grab the same horses at the same time. They sell out in seconds, he told me. “People have 15 stables, multiple browsers and computers, and they run bots and scripts that automatically buy a hundred horses.” Like a hot, hipster IPO.

Zed Run announced it would release new horses in waves, every 15 minutes. A private message board on the Discord app was full of scepticism. The first wave, at 5pm US Pacific time, was for bidders who hadn’t bought during the previous drop due to technical glitches. I was in the second wave. I clicked my link at precisely 5.15pm. 

But nothing happened. One minute passed, and then Twitter and Discord exploded. No one could access any horses: “Horses not loading”; “what a f****** joke lmao”; “Another dumpster fire. Stay awaaaaaay folks.”

For a split second, a batch of colourful horses flashed on my screen. I clicked one — and a miracle occurred. For about $150, Tearaway Charlie, the lowest rank of Buterin breed, was mine. As I admired his Desert Sand coat, Zed Run posted an apology. Few people had been able to buy. Due to yet more technical glitches, the remainder of the drop was postponed. 

The next few hours were a blur. I entered Tearaway Charlie in his first race, and he took third. I moved him up to the next level, and raced him again. He won! I transferred him to OpenSea, and put him up for sale. An offer came in right away, for 0.35 WETH, or about $820. On paper, I had made five times his price. 

I watched Tearaway Charlie prance around my screen in 3D for the last time. Then I hovered my cursor, poised to click “sell”. 

But I couldn’t do it. He had already moved up from Class V to Class IV. I watched a replay of the Stockholm Sprint Championship, where he had fought off Bright Knight and Gandalf the White to win by a nose. This horse had potential.

Many of the arguments about crypto boil down to a debate about centralised sovereign control versus free-market libertarianism. Crypto markets are part of a movement known as decentralised finance. “DeFi” advocates say crypto can improve the finance industry in the same way digital disintermediation has revolutionised transport, news, entertainment and various consumer goods and services. They point to the inefficiencies and opacity of financial intermediaries.

Both banks and technology firms have significant market power, and crypto is already eroding their dominant share. There are an estimated 1.7bn unbanked people, and new crypto technologies could provide low-cost access to credit as an alternative to the double-digit charges for credit cards, payday loans or other usurious lending. 

Vast numbers of people remain outside the traditional financial system

On the other hand, government regulators say they can protect investors and borrowers in ways DeFi will not. Regulated institutions are also working to reduce costs. Both centralised and decentralised approaches can use blockchain technology, which includes records and timestamps that preserve the safety and security of traded assets. 

In practice, some algorithms that govern crypto platforms are intentionally opaque. For example, Zed Run race results and horse-trading are public, but no one outside Zed Run is supposed to know what makes horses more likely to win, or when more will be created. Many crypto transactions have high fees as well. Once you transfer money into Zed Run, all of your later transactions there will be free. But getting money out will cost you. 

A middle ground position is that there is promise for both centralised and decentralised markets. Technology should make it easier for many people to borrow and transfer money, wherever that is done, and whether in euro or wETH. For some, crypto will present new and exciting opportunities. For others, it will be a costly headache that puts their savings at risk.

I raced Tearaway Charlie 10 times in all. The results are public, on the blockchain: he won two races and finished in the top four nine times. I consulted an expert and got updates about my horse’s value from, and

Although my horse’s record was solid, his winnings were small, net of race entry fees. I listed him at OpenSea again, and ultimately said goodbye, selling him for 0.35 ETH. As the real estate adage goes, the first offer is often the best. 

Unfortunately, there was no shortcut on the way out. The first step, from wETH to ETH, required a transfer fee, paid in ETH. But I didn’t have any ETH, since I previously had exchanged it for wETH, the only currency you can use to buy a horse. I bought a small amount of ETH to cover that fee (and paid a new fee for that). But by the time the new ETH arrived, the transfer fee had risen, presumably due to increased demand, so I had to buy yet more ETH (and pay yet another new fee). As the “Hotel California” lyric goes: “You can check out any time you like, but you can never leave.”

Then there were nerve-racking delays as my money moved through the steps, from wETH to ETH, from Zed Run to MetaMask, and so on. One expert who has designed bots that scour NFT websites described the steps as “entering black holes”. 

Eventually I was able to leave, with $577 more than I had brought in. I donated my net profits to Southern California Thoroughbred Rescue, which saves racehorses from slaughter and abuse. I could have gambled more on Tearaway Charlie, or kept him as a collectible, but at least I know he won’t be shipped off for meat.

The returns to cryptocurrencies and NFTs have been volatile but high overall. Crypto markets offer the same features that private, non-sovereign money has for millennia: they provide a medium of exchange, store of value and unit of account, all of which are useful. 

The store of value function is important; in many countries, family heirlooms are the main stock of wealth. Crypto assets could ultimately be superior stores of value since they don’t physically degrade in the way jewellery, rugs or furniture do.

But because crypto is untethered to the physical world, there is greater potential for speculative mania. Some economic historians defend price bubbles as rational, even the skyrocketing prices of 17th-century Dutch tulip bulbs (to five times the cost of a house). But, as one central banker quipped, referencing crypto: “At least then you got a tulip.”

My wild ride at Zed Run was consistent with many of the lessons, good and bad, from thousands of years of creative trading of financial assets and money privately, outside of government regulation. But the pandemic introduced some unanticipated wrinkles. Many people who have tasted life without in-person contact are not eager to return to the real world.

Cryptocurrencies and NFTs offer an opportunity to make money without getting up from the sofa; scratch a gambling itch without treating horses inhumanely; amass a fortune from your parents’ basement. The metaverse idea is to enjoy a life that is simultaneously real and virtual, drawing benefits from both.

Detail from Beeple’s ‘Everydays: The First 5000 Days’. The groundbreaking NFT sold for $69m in March
Detail from Beeple’s ‘Everydays: The First 5000 Days’. The groundbreaking NFT sold for $69m in March © Christie’s via Reuters

At the same time, a new generation is testing the limits of markets, assembling to attack established interests and questioning the viability of national currencies. They learn about new investing strategies en masse on TikTok. There are generational differences in how the central banks’ rescue programmes have been perceived, and many crypto proponents express concerns about inflation and the credibility of sovereign-backed money. Scepticism about sovereign currency goes along with the youthful embrace of crypto. Almost two-thirds of the bidders for the $69m NFT from the artist Beeple were under the age of 40.

Tensions about crypto are palpable. Social media influencers are persuading millions of young people to put their money in cryptocurrencies and NFTs. Fintech firms are raising billions of venture capital. Meanwhile, PayPal, Square, Venmo, Visa and Mastercard are integrating cryptocurrencies into their systems. Large banks are resisting, but less than ever. When Robinhood, the retail trading app, recently announced financial results in its initial public offering prospectus, many analysts were surprised that so much revenue came from retail investors trading dogecoin.

The value of bitcoin plunged last month, after a regulatory crackdown by China and an announcement that US prosecutors had confiscated ransom from a bitcoin wallet. Many government officials view bitcoin and ethereum as a serious environmental threat. China clamped down on crypto “mining” recently, after reports that these activities threaten to consume more than 5 per cent of the country’s electricity.

Ultimately, the policy questions about cryptocurrencies and NFTs should be resolved with the same two-pronged approach we use for other financial assets: disclosure and an anti-fraud regime. Participants in these markets should receive material information about what they are trading, and an enforcement mechanism should protect victims when someone misstates or omits that information. If private platforms do not provide both of these protections, governments are likely to step in.

© Timo Lenzen

What about the personal question? If you like trading collectibles, you’ll almost certainly enjoy trading NFTs. But be careful. Racing horses can be addictive, in any form. The Bored Apes community is far from boring. My friends obsess over their virtual bonsai trees. It’s hard to stop.

Zed Run captures both the audacity and promise of cryptocurrencies, NFTs and the new generation of financial innovators seeking to redefine money. It feels like a chaotic party staged by a college fraternity. Yet its future looks bright, perhaps even as bright as the new 3D Zed Run racetrack, and horses, sponsored by Stella Artois.

Regulators aren’t so sure about crypto. Britain’s Financial Conduct Authority has increased its oversight of crypto markets; on June 25, the FCA issued a warning about Binance, a large cryptocurrency exchange, and barred Binance’s UK subsidiary from regulated activities in the country. US Senator Elizabeth Warren has railed against crypto markets, calling them the “wild west”. More will surely join them soon.

Eventually, governments might spoil the fun. Enjoy it while it lasts.

Frank Partnoy is professor of law at the University of California Berkeley School of Law and author of ‘The Match King: Ivar Kreuger, the Financial Genius Behind a Century of Wall Street Scandals’

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