Vitalik: FTX is ‘a huge tragedy’ that offers lessons to crypto community
The co-founder of Ethereum (ETH) Vitalik Buterin has laid out his plans for a crypto landscape in a post FTX world.
Buterin said the bankruptcy of the FTX cryptocurrency exchange had validated community concerns that centralisation is a “default suspect” and there are lessons to be learnt.
In a recent Bloomberg interview, the ETH co-founder said these lessons included trusting “open and transparent code above individual humans”.
However, Buterin reaffirmed his belief in the stability of blockchain technology despite acknowledging the demise of FTX.
ETH to USD
Buterin’s CEX guide
As Buterin hoped the crypto world can learn and move on from this, he published a blog post discussing the future of centralised exchanges (CEX) on 19 November.
He said: “Every time a major centralised exchange blows up, a common question that comes up is whether or not we can use cryptographic techniques to solve the problem.”
Buterin argued CEXs could use cryptographic proof of reserves, rather than relying on centralised parties like auditors or government licenses. He added:
These suggestions from Buterin follow FTX and its founder Sam Bankman-Fried being accused of funnelling consumer funds to the Alameda Research trading firm and financing allegedly “risky bets”, according to The Wall Street Journal.
A liquidity crunch eventually occurred where consumers were unable to withdraw their own funds, which ultimately led to FTX’s downfall.
The FTX backlash
Buterin is not the only industry figure to publicly criticise FTX. The Binance CEO Changpeng Zhao took to Twitter at the beginning of the exchange’s crisis.
In reference to the events that led to FTX’s downfall, Zhao advised exchanges to not “borrow if you run a crypto business” and “never use a token you created as collateral”.
Two big lessons:
— CZ ???? Binance (@cz_binance) November 8, 2022
1: Never use a token you created as collateral.
2: Don’t borrow if you run a crypto business. Don't use capital "efficiently". Have a large reserve.
Binance has never used BNB for collateral, and we have never taken on debt.
Stay #SAFU.????
Meanwhile, Brian Armstrong, the CEO and co-founder of Coinbase, said: “This event appears to be the result of risky business practices, including conflicts of interest between deeply intertwined entities, and mis-use of customer funds (lending user assets).”
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