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The FTX implosion is an opportunity to learn

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At TechCrunch Sessions: Crypto 2022, Chainalysis CPO Pratima Arora, Tezos co-founder Kathleen Breitman and Ledger CEO Pascal Gauthier talked about security in the crypto industry. A good chunk of the discussion was spent talking about the collapse of FTX.

“First of all, I don’t think it is over,” Pascal Gauthier said. “In the FTX story, it is starting to be a bit more clear every day that the vast sums of money have sort of disappeared and sort of been mismanaged by SBF and his management team.”

As a crypto exchange, FTX has become a sort of single point of failure for many users as well as for many of the moving parts of the crypto industry. It’s still not clear how many people, companies and projects have been affected by FTX filing for bankruptcy. But it makes you wonder if crypto has been a bit too centralized.

“Cryptocurrencies are basically meant to disintermediate — that’s explicitly their purpose. And I think if you’re not designing something where users can be empowered in some form or another, you’re not doing a good job of designing your protocol. Basically, you’re just shifting the onus from one centralized actor to another,” Tezos co-founder Kathleen Breitman said.

But it doesn’t mean that centralized exchanges will disappear overnight. Many crypto users simply don’t know how to store their crypto assets in a secure way — whether it’s a hardware wallet like Ledger or a non-custodial software wallet. That move to decentralized crypto is going to require some education — and it might be a good opportunity to learn.

“We need to unlearn web2 and learn web3. Web2 is something where you don’t control anything. You are the product for bigger companies. Therefore, you click yes, yes, yes on everything that you do without thinking twice and you sacrifice freedom for convenience,” Ledger’s Pascal Gauthier said.

“The problem is web3 cannot work if you click yes, yes, yes [ … ] And there is some convenience that will go away as a result of this because you have just to be much more responsible in the sense that now it’s yours. It’s for you to worry about it,” he added.

People were already saying that we were in a crypto winter before the FTX saga. That’s why the coming months and years are likely to be a long bear market for the crypto industry. But people who have been working in crypto for long enough have already been through tough times.

“We will see some slowness on adoption,” Chainalysis’ Pratima Arora said. “I feel like this is the time to hunker down and build, and then the best companies will survive. We will weed out things that don’t work. And we will see that without bad actors we’re going to come out of it stronger. It’s like a cleansing round.”

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