The earthquake in crypto caused by FTX bankruptcy
By James@PlatON from Tokyo
Although I have got used to earthquakes after living in Tokyo for many year, still got shocked when there is a big one, and swing for long. The fears come from the noise of the building when it tries to absorb the energy, and the news about damages caused to other people.
The crypto earthquake by FTX, please let me call it that way for convenience, is causing a lot of fears. Due to it’s scale, assume magnitude 7.0, the impact is deep and broad through FTX’s
investor network, as well as FTX’s investments to other ecosystems. This remind me the 2000 dot com bubble, and 2008 Lehman ﬁnancial crisis. Or more close to crypto world, the Mt. Gox bankrupt happened in Shibuya Tokyo.
Compare to the Mt. Gox event, we still need to wait for more details from FTX, hope there is no asset vanish through hacking, a test to the governance of FTX aftermath by appointed management team, so the end users may not need to suffer long painful compensation procedure. If lucky enough, get fund back when bull market come, cash out for proﬁt instead of panic sale.
From personal feeling, this incident is more like 2000 dot com bubble, when greedy capital chasing young talents with huge proﬁt expectations. Investments after investments, new ﬁrms after new ﬁrms, ends up cannot survive without enough cash ﬂow due to lack of proﬁtable revenues. The outcomes includes birth of young millionaires, a lots of start ups dead bodies,
investment lost of big ﬁrms, bear stock market etc… There is one good thing, the infrastructure investment were huge, it layed the fundamental infrastructure for coming web2 spring. The efforts were not wasted.
From my personal observation, there are so many healthy innovations in crypto world, including matured ZKP and ongoing MPC and HE technologies. A great infrastructure is emerging as a result of active investments which lured tons of talents. I still see some good signs regardless the too aggressive and careless investments. From another point of view, this is again a hot topic and eventually becomes a great education case for those who don’t know crypto much yet. The falling FTX is a centralized exchange, under regulated investments in traditional ways. Not a DEX. The true web3 style should be transparent and veriﬁable. For example, as a FTX JP exchange user, I still cannot or don’t know how to verify where client asset be stored and safe guarded. I believe DEX has a better answer, since every user controls their own wallets.
Assume individuals controls wallet in a MPC secure way, there will be much less panic. And if key investors are involved in FTX’s core fund operation as threshold signature participant, will those reckless investments be prevented?Let’s learn surviving skills from this earthquake, and move ahead to web3.