cryptographic proofs that show that the funds they hold on-chain are enough to cover their liabilities to their users
In a Nov 20 interview with Bloomberg, Ethereum co-founder Vitalik Buterin shared his thoughts on the recent crash of the FTX crypto exchange. Describing the situation as a colossal tragedy, he agrees that the crypto industry still has a long way to go.
Despite that reality, Vitalik still maintains his belief in the stability of blockchain technology. However, he admits that people have been the major problem behind the crash of FTX and several high-profile platforms in the crypto space. He notes that the FTX crash raises more questions about the suitability of centralized crypto platforms.
Vitalik also states that many others within the Ethereum community share his views on the efficacy of centralized crypto platforms:
“That said, many in the Ethereum community also see the situation as a validation of things they believed in all along: centralized anything is by default suspect.”
Thus Vitalik insists on trusting in open and transparent code instead of humans to run the crypto industry. Before his interview, Vitalik released a guide on operating a “safe CEX platform” with proof of insolvency via Twitter,
In the guide, Vitalik recommended using “cryptographic proofs that show that the funds they hold on-chain are enough to cover their liabilities to their users.” Centralized crypto exchanges that use this option would offer more protection to users on their platforms.
Currently, most crypto exchanges only rely on “fiat methods” like government licenses, corporate governance, and auditors to verify the suitability of centralized crypto platforms. Exchange operators also undergo background checks.
