FTX collapse: For Vitalik Buterin “everything that is centralized is suspect by default”

Vitalik Buterin, says many people in the Ethereum community see the collapse of FTX “as a validation of what they’ve always believed: anything centralized is by default suspect“. However, he cautioned that automatically downgrading all things that former FTX CEO Sam Bankman-Fried believed “is a mistake“.

Vitalik Buterin on the collapse of FTX.

Vitalik Buterin shared his thoughts on the failure of crypto-currency exchange FTX and its former CEO, Sam Bankman-Fried (SBF), in an interview with Bloomberg published Sunday. FTX filed for Chapter 11 bankruptcy protection on November 11. Buterin told the media outlet:

What happened to FTX is of course a huge tragedy. That said, many in the Ethereum community also see the situation as a validation of what they’ve always believed: anything centralized is by default suspect.

Ethereum’s co-founder pointed out that blockchain-based, decentralized (defi) financial protocols work “seamlessly“. He emphasized the importance of placing one’s trust in “open and transparent code before individuals.“

Vitalik Buterin warned in a tweet last week, “The ‘everything centralized is evil by default, use defi and self-defense’ ethos worked very well this week, but don’t forget that it also comes with risks: bugs in the smart contract code. It is important to guard against this.“

In another tweet, the Ethereum co-founder warned:

Automatically devaluing every single thing SBF believed in is a mistake. It’s important to reflect and determine which things contributed to the fraud and which things did not.

Vitalik Buterin also commented on the collapse of stablecoin terrausd and the crypto-currency LUNA, now called luna classic (LUNC). While noting that “collapses like this are necessary for the ecosystem on the one hand“, he stressed that on the other hand, “I really wish this had happened when terra/luna was ten times smaller.“

In an interview with the Straits Times, published on Sunday, the co-founder of Ethereum warned against Singapore’s approach to crypto-currency regulation. He stated that the “city-state’s willingness to make a distinction between the use of blockchain and crypto-currency is like one of those weird things … The reality is that if you don’t have crypto-currency, the blockchains you’re going to have are just fake and no one is going to care.“