Ethereum co-founder Vitalik Buterin said that the collapse of the FTX exchange has shown once more that the issues lie in people and not technology.
Buterin spoke out in the wake of the FTX saga, giving his thoughts and some positives from one of crypto’s largest black swan events. In a November 20 Bloomberg interview, Buterin stated that the collapse of FTX has many lessons for the whole crypto ecosystem.
He also acknowledged that the underlying stability of distributed ledger and the technology that powers the crypto asset economy has not come into question. The issue in this incident (and many before it) has been people and not technology.
Vitalik Buterin also labeled the FTX collapse as a ‘massive tragedy’ but added that it reaffirms the position of most in the Ethereum community about 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 also said that this ethos includes trusting in open and transparent code above humans. Over the weekend, Vitalik Buterin posted a guide to having a “safe CEX” with legitimate proof of insolvency.
Furthermore, he stated that instead of relying primarily on ‘fiat methods’ like auditors, government licenses, background investigations of individuals running exchanges, and corporate governance, the exchanges could develop:
“Cryptographic proofs that show that the funds they hold on-chain are enough to cover their liabilities to their users.”
Having a safe CEX: proof of solvency and beyondhttps://t.co/AKEweYZfj2
Big thanks to @balajis and staff from @coinbase @binance @krakenfx for discussion!
— vitalik.eth (@VitalikButerin) November 19, 2022
The issues for FTX are understood to have arisen from the exchange’s use of client deposits for other purposes. After a massive influx of withdrawal requests came to the exchange earlier in the month, it found itself unable to meet the withdrawal demand with its current liquidity.
Buy Bitcoin NowVitalik Buterin is not the only industry leader who has recently spoken out about the FTX fallout. On November 17, Binance CEO Changpeng Zhao said that while regulation is important, it is highly necessary for industry players to lead by example.
While attending the Indonesia Fintech Summit 2022, Zhao insisted that the whole FTX saga might have set back the crypto sector by “a few years,” and might see regulators extensively scrutinize the sector “much, much harder, which is probably a good thing, to be honest.”
