The Bull Case For FTX
A Story Of Traditional Finance Masquerading As Something Else
The following excerpt was taken from the Nov 22 OpEd I had written for ChainSafe’s newsletter “Centralization Strikes Again”. If you find this content engaging, we would love your support on our Substack! ❤️
I will not waste my reader’s precious mental capacity on the well-documented FTX collapse. Everything about the debacle invokes within me a sense of vile contempt for unchecked centralization. Worse, FTX was the wolf in sheep’s clothes — an organization playing at decentralization theatre — an act we’ve unfortunately had to see play out in semi-automatic bursts. First, with Luna/UST, and then followed by the incapacitating shots of Celsius, Three Arrows Capital, Bancor, FTX, BlockFi… you get the picture. (And I extend my condolences if you were at all caught in the crossfire.)
Yet, as one trojan horse collapsed after another, I saw a community prop itself up in defence, aided by one of the most powerful force for public good ever created — the blockchain. More crucially, the two aforementioned combined to enable a sobering self-examination: why exactly are we building this tech? Who are the bad actors? What were the warning signs? And how can we do better? This is, in fact, the bull case for FTX. Allow me to explain.
The FTX collapse saw unprecedented participation from the web3 community in citizen journalism. While traditional media outlets wrote softball puff pieces in service to their overlord SBF, the Twitter and Substack sleuths came out to play ball. Scores of citizen journalists unearthed, observed, tracked, and shared an unrelenting amount of data, with around-the-clock coverage that would put any TradMedia to shame. No stone was left unturned, as conspiratorial-level connections were discovered between FTX and the establishment — including SBF’s parents and regulators like the SEC’s Gary Gensler and US Senator Elizabeth Warren. FTX made way for the best of us to shine during crypto’s Lehman Brothers moment.
Of course, none of it would have been possible without the virtues of the always online public ledger of on-chain record. This, folks, is “privacy for the weak, transparency for the powerful” manifested: a tiny preview of what it could mean if we bridged our most important institutions on-chain — where activities like financial transactions are transmitted and recorded in a transparent and verifiable way. Is this not a public good worth preserving? It allowed our citizen journalists to track the movements of funds between exchanges, follow the FTX hack, and push the needle on innovations like mandatory proof-of-reserves and proof-of-liabilities.
And as suggested earlier, these forces enable a crucial level of self-scrutinization. It empowers us as a community to ask the important questions, keep our institutions honest, and demand the continued evolution of our space. In the well-trodden analogue of web3 as an organic, emergent biological ecosystem, the forest fire plays a crucial role in stimulating new growth. It clears away the diseased, the stagnant, the hollow in an unforgiving hellfire. Just as the previous forest fire cleared away ICO-era zombie projects which made way for newer species like Gitcoin to thrive, this fire will also clear away parasites of the FTX-variant and provide precious fertilizer for newer forms of coordination tech.
That is the silver lining. The entirety of the response has been nothing short of an incredible thing to witness, and is something that we should expect for future on-chain catastrophes. We’re speedrunning black-swan events and naturally selecting for the strongest organisms to survive. The ’08 financial collapse managed to forge a new path in humanity’s tech tree. In similar fashion, we too will come out of this for the better as a united community under the banner of decentralization.
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