Once ranked as the world’s second largest cryptocurrency exchange, FTX fell into a downward spiral after a news article that came out on 02 November 2022 raised concerns over its financial health and that of cryptocurrency trading firm Alameda Research, its sister company.
The article also claimed that a large amount of assets held by Alameda Research consisted of FTX’s native cryptocurrency FTT. A few days later, Changpeng Zhao - the CEO and Co-Founder of FTX’s rival cryptocurrency exchange Binance - announced that his company will sell off its substantial holdings of FTT.
It was the beginning of the end for FTX.
What lessons can we learn from the debacle and what does it mean for the future of crypto? Read on to find out what industry experts and personalities have said about the matter.
REACTIONS FROM INDUSTRY EXPERTS
MICHAEL SAYLOR, MicroStrategy Founder and Executive Chairman: During an interview with Yahoo! Finance, the outspoken bitcoin proponent said that “I think this is going to be really helpful for bitcoin because this is an educational moment and people are realizing the benefits of buying a crypto asset that’s backed by the world’s most powerful computing network and by 10 gigawatts of energy, and the difference between that and the 20,000 other cryptos that are - in essence - backed by nothing, and they’re just like other fiat currencies.
BRIAN ARMSTRONG, Coinbase CEO and Co-Founder: The well-known businessman and investor reacted to a tweet shared by US Senator Elizabeth Warren on the same day that reports came out that federal agencies in the US are investigating FTX.
CHANGPENG ZHAO (CZ), CEO and Co-Founder of Binance: On 11 November 2022, the same day that FTX, FTX.us, Alameda Research and dozens of subsidiaries filed for bankruptcy, CZ shared the tweet below.
TOM EMMER, a US Congressman: During an interview with FOX Business, US Congressman and well-known crypto proponent Tom Emmer said that FTX’s collapse is “...not just a failure of FTX, it’s a failure of CeFi…that’s known as Centralized Finance. It is not a failure of crypto. It's a failure of Sam Bankman-Fried, it’s a failure of business ethics and it’s a failure of the government oversight and regulatory procedures.
KEVIN O’LEARY, Entrepreneur and TV Personality: The popular shark investor, who invested in and was a spokesperson for FTX before, may have indirectly shared a lesson on the advantages of using blockchains when he said during an interview with Yahoo! Finance that “One of the remarkable situations about this financial collapse - different to Enron, different to Lehman Brothers, different to Bear Sterns - is that 90 plus percent of these transactions are on chain. They are irrevocable, they cannot be changed, they’re on public record forever…so, by the time this is over - and you asked me what Sam Bankman-Fried did - well, we’ll know. It’ll be totally, totally transparent.”
THE IMPORTANCE OF BEING TRANSPARENT
According to our CEO and Co-Founder Julian Hosp, the FTX debacle provides a key lesson on why it’s important for crypto platforms to provide transparency. “Transparency will be the absolute key criteria for how customers will select exchanges. Customers will not trust, unless they can verify themselves,” he said.
A GLIMPSE INTO THE FUTURE OF CEDEFI & CRYPTO
He also added that the undoing of FTX imparts a valuable lesson on what the future holds for both CeFi and DeFi. “Pure DeFi will be too difficult to use and pure CeFi will be too difficult to trust,” he said.
“Solid exchanges may be able to increase their stranglehold. However, we will see more and more platforms mixing DeFi and CeFi into CeDeFi, where customers have the same fantastic user experience from CeFi, but the transparency from DeFi. This will be the road forward for crypto,” he added.
LIQUIDITIES FROM MULTIPLE BLOCKCHAINS
Sharing more thoughts on what lies ahead for crypto, he added that “Liquidities in DeFi will not be concentrated on one dominant blockchain, and will spread across multiple blockchains and multiple protocols as evident throughout the history of crypto from the start.”
OUR COMMITMENT TO CAKE DEFI USERS
At Cake DeFi, we continuously find innovative ways to safeguard user funds while remaining very transparent. In line with this effort, we’ve made it easier for users to verify our Proof-of-Reserves and check our liabilities.
Users may also visit our transparency page to view all of our transparency features, protocols and reports, and our status page for real-time information on whether our services are up and running.
We also publish quarterly transparency reports and have integrated a rewards dashboard into our mobile app to allow users to check their crypto rewards. For more information on our transparency features and safety protocols, you may click here or here.
With that, we hope that you’ll continue doing research and remain informed on the various ways to keep you and your funds well-protected. Always ask questions. Do not assume. You may also consider options such as using self-custody wallets, dollar-cost averaging and diversification.
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