The collapse of FTX, according to Ethereum co-founder Vitalik Buterin, has demonstrated once again that the problem is humans, not technology.
In the aftermath of the FTX crash, Ethereum co-founder Vitalik Buterin has spoken out, providing his insights and some positives from one of crypto’s largest black swan episodes.
Buterin stated in a Bloomberg interview on November 20 that the collapse of FTX had lessons for the whole crypto community.
He agreed that the basic stability of distributed ledger technology and the technology that powers the crypto asset system is not in doubt. People, not technology, have been the source of these (and previous) problems.
Buterin also called the FTX crash a “major tragedy,” but stated that it reaffirmed many in the Ethereum community’s stance against centralization:
“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.”
He went on to say that this attitude involves putting open and transparent code ahead of humans. Buterin published a guide to having a “secure CEX” with documentation of insolvency over the weekend.
Instead of relying solely on “fiat methods” like government licenses, auditors, corporate governance, and background checks on people running exchanges, he said exchanges could create “cryptographic proofs that show that the funds they hold on-chain are enough to cover their liabilities to their users.”
The exchange’s troubles are thought to have come from the exchange’s usage of consumer deposits for other reasons. Following a massive inflow of withdrawal requests earlier this month, the exchange found itself unable to service withdrawal demand with its present liquidity.
Vitalik Buterin is not the only industry figure who has lately spoken out about the FTX debacle. On November 17, Binance CEO Changpeng Zhao stated that while regulation is required, industry leaders must lead by example.
During the Indonesia Fintech Summit 2022, Zhao stated that the FTX debacle has likely put back the crypto business by “a few years,” and that authorities would likely analyze the industry “much, much harder, which is probably a good thing.”