FTX Scandal Is A Watershed Moment for Crypto Industry

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Nearly a year has passed since the demise of FTX, and the crypto industry still does not seem to have fully grasped the gravity of these serious incidents. Although more consumers are quite aware of the unreliable nature of so-called celebrity endorsements from FTX supporters like Steph Curry and Tom Brady, as highlighted during the exchange’s collapse, the majority of end-users are still not well-versed on some very basic crypto concepts. 

 

For instance, one of the main value propositions of crypto is decentralization, which is not a solution in itself, but it’s a means to an end. In simple terms, crypto and blockchain tech enable greater financial inclusion and autonomy. This is achieved by allowing individuals or other entities to truly own and control their funds via self-custody and permissionless protocols.

 

A Defining Moment for the Financial Services Sector

The FTX scandal can be considered an iconic or watershed moment not just for crypto, but also for the traditional financial ecosystem. Now that the FTX trial is finally underway, the testimonies given by key company executives can provide valuable insights into the potentially serious drawbacks of centralized platforms. And it also indicates that we need to adopt a decentralized infrastructure that’s supported by , and other open-source/permissionless platforms.

 

Interestingly, there are still many centralized exchanges operating across the crypto space, but there is growing support for decentralized structures that focus on self-custody and permissionless trading. This is a positive development because the damaging collapse of FTX has shed light on the dangers of trusting large, centralized firms with your money. As Satoshi Nakamoto, the pseudonymous creator of the Bitcoin protocol, has explained, the main problem with fiat currencies is the tremendous amount of trust required to support it. For example, we need to trust the central bankers not to debase the national currency, and then we need to put even more trust into intermediaries to facilitate transactions. 

 

A Permissionless, Trustless Future, Supported by Self-Custody

With the rise of Bitcoin and other emerging crypto networks, we finally have a real (once in a lifetime) chance to break away from the highly centralized traditional finance or TradFi system. However, this cannot be achieved if we adopt the same legacy approach to managing money that incumbent banks have used for many years. 

 

Without a doubt, the traditional banking system has failed us. Major regulators in the US, the UK, and throughout Europe continue to impose hefty fines on centralized financial service providers like TransUnion, among many others. Not only do centralized solutions mishandle user data, they are also increasing the threat of fraud and theft. The advent of decentralized crypto technology aims to provide a more secure and frictionless financial system for individual users and business organizations alike.

 

For instance, the developers of Yellow Network aim to provide a permissionless and truly decentralized infrastructure that encourages investors to self-custody their own funds. While it may seem easier to simply allow a “trusted” third-party to the custody of our funds, it is truly painful to go through the experience of losing one’s life-savings just because we trusted an exchange like FTX. 

 

Self-Custody Is the Real Value Proposition of Crypto

Although the crypto space has now become crowded with so-called digital asset custodians like BitGo, Zodia Custody, among many others, the well-informed and sensible end-user will always learn how to safeguard their own hard-earned crypto holdings. While it does not necessarily take a rocket scientist to learn how to properly self-custody crypto-assets, it does require a fair bit of technical expertise and know-how. 

 

Luckily, there are platforms like  Yellow Network which feature an extensive range of solutions and educational resources that can help people get started on their journey to self-custodying their assets. In simple terms, it’s like being your own bank, but better. With the practice of self-custody, one can also enjoy the benefits of never having their funds getting confiscated. For instance, a bank can decide arbitrarily to suspend your account or prevent you from accessing it at any given time. In the crypto world, this often happens when centralized operators like Binance and FTX suddenly halt withdrawals for an indefinite period of time.

 

Financial Empowerment Can Be Attained with Self-Custody Solutions

Not only can these types of situations be extremely stressful, they can also lead to more serious consequences like people taking extreme measures by engaging in self-harm. To avoid these catastrophes, it is highly advisable to self-custody and use decentralized trading platforms. While decentralized exchanges or DEXes are still in their early stages of development, the underlying tech has advanced enough to support permissionless and secure crypto transactions. 

 

Yellow Network offers an all-in-one type of ecosystem that could allow a large number of crypto users to harness the benefits of decentralization. With the right digital tools and educational materials, crypto investors can start building a more secure financial future. By truly owning our assets, we can independently decide how and when to spend or save our hard-earned money.