FTX Implosion is a learning opportunity

During TechCrunch Sessions: Crypto 2022, Pratima Arora, CPO of Chainalysis, Kathleen Breitman, co-founder of Tezos, and Pascal Gauthier, CEO of Ledger, discussed security in the cryptocurrency industry. And much of the discussion was about the FTX crash.

“First of all, I don’t think it’s over,” said Pascal Gauthier. “Throughout the history of FTX it becomes a little clearer every day that the big sums are gone and mismanaged by SBF and its management team.”

As a cryptocurrency exchange, FTX has become a single point of failure for many users and many of the moving parts of the cryptocurrency industry. It remains unclear how many people, companies and projects will be affected by FTX’s bankruptcy filing. But one wonders if cryptography has become too centralized.

“Cryptocurrencies are essentially for disintermediation, which is expressly their purpose. And I think if you’re not designing something that somehow empowers users, you’re not designing your protocol right. You are essentially shifting responsibility from one centralized actor to another,” said Kathleen Breitman, co-founder of Tezos.

But that doesn’t mean centralized exchanges will disappear overnight. Many cryptocurrency users simply don’t know how to keep their cryptocurrency safe, be it a hardware wallet like Ledger or a non-custodial software wallet. This move to decentralized cryptography requires some training and can be a good learning opportunity.

“We have to unlearn web2 and learn web3. Web2 is something you have no control over. They are the product of the biggest companies. So you click yes, yes, yes on everything you do without thinking about it, sacrificing freedom for convenience,” says Pascal Gauthier of Ledger.

“The problem is that web3 doesn’t work if you click yes yes yes […] And that will take away some of the comfort, because you’re going to have to take on a lot more responsibility in the sense that it’s yours now. It’s up to you to take care of it,” he added.

People were already saying that we were in a crypto winter before the FTX saga. Because of this, the coming months and years are likely to be an ongoing bear market for the cryptocurrency industry. But people who have worked with cryptocurrencies long enough have had a hard time.

“We will see some slowdown in adoption,” said Pratima Arora of Chainalysis. “I feel like now is the time to dig and build, and then the best companies will survive. We remove things that don’t work. And we will see that we come out of this stronger without bad actors. It’s like a cleansing.”