Vitalik Buterin, the co-founder of Ethereum, has talked about the collapse of FTX, one of crypto’s biggest “black swan” events, and what he thinks about it.
Buterin told Bloomberg in an interview on November 20 that the fall of FTX has lessons for the whole crypto ecosystem.
He agreed that there has been no doubt about the stability of distributed ledgers and the technology that runs the crypto asset economy. People, not technology, have been the problem in this and other similar situations.
Buterin also said that the FTX crash was a “huge tragedy,” but he also said that it shows that many people in the Ethereum community are right about centralization.
“However, many people in the Ethereum community also see the situation as proof of what they’ve always thought: anything that is centralized is by default suspicious.”
He also said that this philosophy includes putting more faith in open and clear code than in people. Buterin put up a guide to having a “safe CEX” with proof of insolvency over the weekend.
He said that instead of relying only on “fiat methods” like government licenses, auditors, corporate governance, and background checks of the people who run exchanges, exchanges could create “cryptographic proofs that show that the funds they hold on-chain are enough to cover their liabilities to their users.”
People think that FTX’s problems came from the fact that the exchange used customer deposits for other things. When a lot of people asked to withdraw money from the exchange earlier this month, it didn’t have enough cash on hand to meet the demand.
Vitalik Buterin hasn’t been the only business leader to talk about the fallout from FTX. On November 17, Changpeng Zhao, the CEO of Binance, said that regulation is important, but it is more important for people in the industry to set a good example.
Zhao said at the Indonesia Fintech Summit 2022 that the whole FTX mess is likely to have set the crypto industry back “a few years” and that regulators will probably look at the industry “much, much harder,” which is probably a good thing.