The FTX implosion is a learning opportunity

At TechCrunch Sessions: Crypto 2022, Chainalysis CPO Pratima Arora, Tezos co-founder Kathleen Breitman and Ledger CEO Pascal Gauthier talked about security in the crypto industry. And much of the discussion was spent talking about the collapse of FTX.

“First of all, I don’t think it’s over,” said Pascal Gauthier. “In the history of FTX, it is becoming increasingly clear with each passing day that vast sums of money have somehow disappeared and somehow been mismanaged by SBF and its management team.”

As a crypto exchange, FTX has become something of a single point of failure for many users as well as many of the moving parts of the crypto industry. It is not yet clear how many people, companies and projects have been affected by FTX filing for bankruptcy. But it makes you wonder if crypto is a little too centralized.

“Cryptocurrencies are primarily designed to disintermediate – that is expressly their purpose. And I think if you’re not designing something where users can be empowered in one form or another, you’re not doing a good job of designing your protocol. Basically, you’re just shifting the burden from one centralized actor to another,” said Tezos co-founder Kathleen Brightman.

But that doesn’t mean centralized exchanges will disappear overnight. Many crypto users simply don’t know how to store their crypto assets in a secure way – whether it’s a hardware wallet like Ledger or a non-custodial software wallet. This move to decentralized crypto will require some education – and it can be a good learning opportunity.

“We have to give up web2 and learn web3. Web2 is something where you control nothing. You are the product for larger companies. So you click ‘yes, yes, yes’ on everything you do without thinking twice and sacrifice freedom for convenience,” said Ledger’s Pascal Gauthier.

“The problem is web3 can’t work if you click yes yes yes […] And there’s a certain comfort that will go away as a result of that, because you just have to be a lot more responsible in the sense that it’s yours now. You should worry about that,” he added.

People were already saying we were in a crypto winter before the FTX saga. This is why the coming months and years are likely to be a long bear market for the crypto industry. But people who have been in crypto long enough have already been through hard times.

“We will see some lag in adoption,” said Pratima Arora of Chainalysis. “I feel like this is the time to hide and build and that’s when the best companies will survive.” We’ll weed out the stuff that doesn’t work. And we will see that without bad actors we will come out stronger. It’s like a purifying circle.

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