What comes after FTX for blockchain technology?

If you haven’t been following the saga of the collapse of the centralized cryptocurrency exchange FTX, you can catch up here. Sam Bankman-Fried, the exchange’s one-time CEO, was loved and hailed as a “good” billionaire who made high-impact donations and championed “effective altruism.”

As FTX filed for bankruptcy and its financial follies came to light, the crypto world once again took up the “not your keys, not your coins” war cry. A slogan for decentralization, indicating that if crypto holders want to own their assets safely, they must have them in a self-custodial wallet.

So what happens to blockchain technology when trust in centralized exchanges like FTX is broken?

Coinbase, FTX, Binace and more offer something that decentralized solutions don’t and never will have, namely ease of use. Users come to these experiences for the same reason they entrust their money to banks instead of keeping it in a coffee can under their proverbial mattress. They allow a person to outsource financial custody and make administration easier.

Metamask and other self-service solutions have a place in the ecosystem, but their traction and usage will always be niche. Adoption is driven by ease of use and value to consumers. The easiest way for an organization to handle this is to centralize and abstract the services that are the most cumbersome.

In the near term we are seeing a rebound from exchanges owned by large corporations that are holding assets on behalf of a user, but the blockchain world as perceived today is unlikely to be able to grow in this way. If anything, we’ll see it shrink even more niches in terms of its users and application.

The current drop in cryptocurrency values ​​and venture capital funding for blockchain-based startups is often referred to as “crypto winter.” This winter, many pre-financed companies are using the time to build and prepare markets for fair weather. But what if the speculative nature of the industry is not the industry at all?

The blockchain applications we’ve seen so far, from bitcoin to altcoins, from NFTs to the metaverse, are based on speculative financial models and trading. This is an industry that could be called finance at best and gambling at worst. However, these industries can be powered by any technology and have historically been able to leverage blockchains, but finance and gambling themselves do not to need it.

Blockchain exists as a technology in the same way as databases or javascript, it is a tool for developers and businesses to use if it serves their goals and needs. Calling it industry vs. technology is perhaps our biggest mistake of the whole ordeal. What would have been different if we had simply labeled FTX as an unregulated trading platform? Would the story and its growth have unfolded differently?

Blockchain is here forever, it is a technology that will find use and will be used for niche but powerful applications. Every blow blockchain-powered industries are forcing a rethink of how it actually fits into the technological landscape. We do not refer to companies as SQL companies (a common database technology). So why is blockchain different?


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