Vitalik Buterin Offers Crypto Lessons Following FTX Collapse

Ethereum co-founder Vitalik Buterin spoke out in the wake of FTX’s collapse, offering his thoughts and some positives from one of crypto’s biggest black swan events.

In a Nov. 20 Bloomberg interview, Buterin said FTX’s collapse holds lessons for the entire crypto ecosystem.

He recognized that the underlying stability of the distributed ledger and the technology that powers the crypto asset economy has not been questioned. The problem in this case (and many before it) has been people, not technology.

Buterin also called the collapse of FTX a “great tragedy,” but added that he reaffirms the position of many in the Ethereum community regarding centralization:

“That said, many in the Ethereum community also see the situation as a validation of what they believed in all along: anything centralized is suspicious by default.”

He added that this philosophy includes trust in open and transparent code above humans. Over the weekend, Buterin posted a guide to have a “safe CEX” with proof of insolvency.

He said that instead of relying solely on “fiduciary methods” such as government licensing, auditors, corporate governance and background investigations of people running exchanges, exchanges could create “ cryptographic evidence that shows that the funds they hold on-chain are sufficient to cover their liabilities to their users.

FTX’s problems are said to stem from the exchange’s use of customer deposits for other purposes. After a large influx of withdrawal requests hit the exchange earlier this month, it found itself unable to meet the withdrawal request with its current liquidity.

Related: The FTX Fiasco Means Coming Consequences for Crypto in Washington DC

Vitalik Buterin isn’t the only industry leader talking about the FTX fallout recently. On November 17, Binance CEO Changpeng Zhao said that if regulation is necessary, it is more important for industry players to lead by example.

During the Indonesian Fintech Summit 2022, Zhao said that the whole FTX saga would probably have roll back the crypto industry in “a few years” and will likely see regulators scrutinizing the industry “much, much harder, which is probably a good thing, to be honest.”