The failure of FTX shows that the world needs more decentralized finance, not less. Sam Bankman-Fried and the small group of people who controlled FTX ran the company like a bank from 2008 contrary to the original ethos of crypto.
The original ethos of crypto shines through in the design of the founding project, Bitcoin. Bitcoin empowers users to hold bitcoins directly, transactions are transparent and stored on a shared ledger secured by decentralized computational power. Bitcoin’s architecture is based on proven cryptographic techniques, and the code is available online for anyone to review.
Ethereum later extended Bitcoin’s core features to include smart contracts and user issued tokens.
FTX was run like a closed club in an offshore jurisdiction. The company combined custody of user assets with conflicting services, opaque finances, lax governance, and unbacked tokens. Ironically, FTX even entertained a bailout making mockery of the headline Satoshi famously quoted in the genesis block, “Chancellor on brink of second bailout for banks”.
There is nothing entirely risk-free in finance. But if there is one main lesson to draw from the 2008 crisis, it is to unbundle financial services, make them more decentralized and less reliant on opaque and conflicted Too-Big-To-Fail institutions. Bitcoin, Ethereum, and a slew of other subsequent crypto projects serve that purpose.
FTX did just the opposite. Let their failure serve as a reminder to us to stay true to the original crypto ethos of self-sovereign, transparent, and decentralized finance.
Sveinn & Jón Helgi