Following the FTX crash, Vitalik Buterin, co-founder of Ethereum, came out to share some lessons learned from one of the largest black swan episodes in the crypto market.
Vitalik Buterin said that the failure of FTX has lessons for the whole crypto industry in an interview with Bloomberg on November 20.
He admitted that the technology behind distributed ledgers and the market for cryptographic assets is still stable. People have been the issue in this situation (and numerous others before it), not technology.
The FTX crash, which Buterin also referred to as a “huge tragedy,” validates the views of many Ethereum community members against centralization, he continued:
“That said, many in the Ethereum community also see the situation as a validation of things they believed in all along: centralized anything is by default suspect.”
This mentality, he said, places open and transparent code above people. Buterin published a guide to establishing a “safe CEX” with evidence of bankruptcy over the weekend.
The exchanges could develop “cryptographic proofs that show that the funds they hold on-chain are enough to cover their liabilities to their users,” he said, rather than relying solely on “fiat methods” like government licenses, auditors, corporate governance, and background checks of people running exchanges.
It is believed that the exchange’s usage of client deposits for other reasons was the root of the FTX’s issues. The exchange found itself unable to satisfy withdrawal demand with its present liquidity after receiving a significant flood of withdrawal requests earlier this month.
Industry titans other than Vitalik Buterin have lately spoken out about the FTX catastrophe. Changpeng Zhao, CEO of Binance, said on November 17 that although regulation is essential, industry leaders can set a better example.
At the Indonesia Fintech Summit 2022, Zhao predicted that the FTX scandal would have “a few years” of negative effects on the cryptocurrency business and that authorities will analyze the sector “much, much harder, which is probably a good thing, to be honest.”
