In this article, we elaborate a bit on the silver linings that we can see today. We list some positives and winners that can come out of a situation like the FTX crash.
It is not difficult today to assess the grim situation of the cryptoverse. Token prices are seemingly in an endless trap with no positive news on the horizon. We could tell you that this is how crypto winters tend to be, but that wouldn’t be the whole truth. The second largest crypto exchange in the world has never fallen to a rock before, and the devastation caused is nearly $50 billion, directly and indirectly.
Investors in tokens and projects that revolved around FTX lost billions. What is worse is their possible loss of faith in cryptocurrency due to this FTX fiasco. It takes particular courage today to reiterate that cryptocurrency itself is infallible, but these aspects controlled by the men around it are all cause for concern.
In this article, we elaborate a bit on the silver linings that we can see today. We list some positives and wins that can come out of a situation like this.
Cryptocurrency itself cannot be regulated. When you are on a blockchain, with non-custodial wallets and pseudonymous alphanumeric accounts, it is quite impossible for an agency to trace your transactions back to you. What is easily regulated are crypto exchanges that are people with a vested interest. This is the one area where cryptocurrency is vulnerable to human greed and malpractice.
With the fall of FTX, a big silver lining is the amount of regulation that would come into crypto exchanges. Any organization making volumes in the billions a day should have some oversight from a government regulator as well as possible insurance. We may soon have it with all the chaos that the fall of an agency has caused.
Evidence of reserves
Simply put, proof of reserves is a way for exchanges to hold themselves accountable to their users. This is an independent audit performed by a third party to ensure that the exchange is holding either cash or valid tokens to back up the numbers (people’s investments held by the exchange either in cash or tokens ). Binance, the world’s largest crypto exchange, argues that proof of reserves is the solution that could prevent future FTX-like incidents.
Many exchanges around the world, including big ones in India like CoinSwitch, have agreed to have proofs of reserves performed on a regular basis. This helps to ensure public confidence in the exchange as well as general control of larger than life exchanges.
What was wrong with FTX had nothing to do with the failure of a cryptocurrency (FTT is a manufactured currency) or with the blockchain technology that let people down. All because of the people involved and their greed. So this gives more ground for something that is blockchain related but without any direct involvement of people – DeFi. It’s all that’s great about cryptos and blockchain without any human intervention.
Decentralized finance has already grown in recent years, and we may see more of it once we recover from this dark crypto winter. It solves real world problems without any carpet pulling.
Everyone who lost money (not due to the valuation of their token) did so because they had their tokens in a custodial wallet. Simply, it was a case where you had a lot of money but you kept it with someone else to keep it safe. The person you trusted was untrustworthy and ran away with all the money.
Almost ridiculously, the money itself has lost value because it has been stolen. The real fault, however, had always been his guard. We may see more and more non-custodial wallets in the future. This way the money can never be stolen unless the person loses it. In a way, it’s easier to deal with losses when it’s your fault rather than someone else’s fault.
Finding a silver lining this early seems difficult. We can rest assured that global technology has not faltered. We have no reason to believe that cryptocurrency will no longer be the currency of the future. We may just have to be more careful and aware of what we are doing in the cryptoverse. We can’t blindly trust big names in the industry or celebrity endorsements. Doing your own research and taking as much direct control over your funds and tokens is the way to go.