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If you haven’t been following the saga of the collapse of the centralized cryptocurrency exchange known as FTX you can catch up here. Sam Bankman-Fried, the once-CEO of the exchange was loved and heralded as the “good” billionaire, making impactful donations and being a champion for “effective altruism.”
As FTX has declared bankruptcy and its financial follies have come to light, the crypto world has once again taken up the war cry of “not your keys, not your coins.” A slogan for decentralization, cautioning that if holders of crypto want to securely own their assets, they need to have them in a self custody wallet.
So with trust broken for centralized exchanges like FTX what happens next with blockchain tech?
Coinbase, FTX, Binace and more all offer something that decentralized solutions don’t and will never have, which is ease of use. Users come to these experiences for the same reason they trust banks with their money instead of keeping it in a coffee can under their proverbial mattresses. They allow an individual to outsource financial custody and gives ease of management.
Metamask and other self-serve solutions have a place in the ecosystem, but their traction and use will always be niche. Adoption is driven by ease-of-use and value to consumers, the easiest way for a company to handle this is through centralizing and abstracting those services that are most cumbersome.
In the short term we are seeing a recoil from exchanges owned by major companies that custody assets on a user’s behalf, but it’s unlikely the blockchain world as its perceived today can grow this way. If anything we will see it shrink even more niche in terms of its users and application.
The current downturn in cryptocurrency values and venture-capital funding to blockchain-based startups is often referred to as “crypto-winter.” During this winter many pre-funded companies are using the time to build and prep for fairer weather markets. But what if the speculative nature of the industry isn’t the industry at all?
The applications of blockchain that we have seen so far from bitcoin to alt-coins, from NFTs to the metaverse are based on speculative financial models and trading. Thats an industry, you could call it finance at best and gambling at worst. Those industries however can be powered by any technology, and have been historically, the could leverage blockchains, but finance and gambling themselves don’t need it.
Blockchain exists as a technology in the same way that databases or javascript do, its a tool for developers and companies to leverage if it serves their goals and needs, labeling it as an industry vs a technology is perhaps our greatest mistake with the whole ordeal. What would have been different if we just referred to FTX as an unregulated trading platform? Would history and its growth have unfolded differently?
Blockchain is here forever, it’s a technology that will find uses and be used for niche but powerful applications. Every hit the industries fueled by blockchain take forces a rethinking into how it actually fits into the technological landscape. We don’t refer to companies as SQL (a common database technology) companies, so why is blockchain different?
