Vitalik Buterin, co-creator of Ethereum, has shared his opinions on the FTX crash and the lessons to be taken away from one of the cryptocurrency industry’s biggest unpredictable events.
In an interview with Bloomberg published on Nov. 20, he said that the crypto industry may learn from the failure of FTX.
He conceded that there has been no doubt about the reliability of shared networks or the technology that supports the cryptocurrency market. The issue here, as in many similar situations, is with humans, not machines.
Furthermore, Buterin described the FTX crash as a “huge tragedy,” but noted that it validates the views of many in the Ethereum community in regards to 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 said.
Buterin elaborated that part of this mindset is putting faith in publicly available software rather than people. Buterin published a guideline for setting up a “safe CEX” equipped with evidence of insolvency.
He suggested that crypto exchanges might generate “cryptographic proofs that show that the funds they hold on-chain are enough to cover their liabilities to their users” instead of relying entirely on “fiat procedures” such as government licenses, auditors, corporate governance, and background investigations of people running exchanges.
FTX Collapse Shook The Industry
It is believed that the underlying cause of FTX’s issues was the exchange’s diversion of consumer funds for other uses. The exchange was unable to meet withdrawal demand with its present liquidity after a massive wave of withdrawal requests hit early this month.
Meanwhile, many prominent figures in the sector have been vocal other than Vitalik Buterin about the impact of FTX collapse. Recently, the largest cryptocurrency exchange Binance’s CEO has released a set of 6 principles for keeping a stable centralized exchange following his two lessons that could be learned from the events concerning the FTX failure.