After the "earthquake" of FTX's bankruptcy, where will Web 3.0 head?

Author: JamesQu@PlatON

Having lived in Tokyo for many years, I have long been accustomed to earthquakes, but I still feel shocked when a massive and long-lasting earthquake occurs. This fear comes from the terrifying sounds emitted by buildings absorbing seismic energy, as well as various news reports about casualties caused by earthquakes.

For convenience, I liken the FTX bankruptcy event to a "major earthquake" that triggered panic in the cryptocurrency market. This "earthquake" is comparable to a magnitude 7 earthquake and has had a profound and widespread impact on other ecosystems through FTX's network of investors and its investment projects. It inevitably reminds me of the bursting of the internet bubble in 2000, the Lehman financial crisis in 2008, and the bankruptcy of the Tokyo-based "Mt. Gox" exchange, which is more closely related to the cryptocurrency space.

The "Mt. Gox" incident has long been settled, but more details about the FTX bankruptcy are still pending disclosure. We pray that no assets are stolen due to hacking, so that end users do not have to endure a long and painful claims process. At this critical moment, the governance ability of the FTX management team is being tested. However, investors should also avoid panic selling, as they may still recover their investments and make a profit when the next bull market arrives, if they are lucky.

In my opinion, the FTX bankruptcy is closer to the bursting of the internet bubble in 2000. At that time, the greedy capital market relentlessly pursued young talents seeking high profits. Countless investment projects and startups faced cash flow crises due to their inability to generate revenue, ultimately declaring bankruptcy. A series of chain reactions followed: one young millionaire after another emerged, numerous startups collapsed, major companies lost their investments, and a bear market ensued… But the good news is that investment in network infrastructure has increased, laying the foundation for the upcoming Web 2.0 spring. In summary, all efforts were not in vain.

From my personal observation, there are many positive and healthy innovative activities in the cryptocurrency space, such as the development of mature zero-knowledge proofs (ZKP), as well as the emerging multi-party computation (MPC) and homomorphic encryption (HE) technologies.

Positive investment projects attract a large number of talents to this field, ultimately creating a robust infrastructure. Although some investments seem overly aggressive and hasty, I have still observed some good signs.

From another perspective, such bankruptcy events will become a hot topic, providing a valuable lesson for those who are less familiar with the cryptocurrency market. The fallen FTX is not a decentralized cryptocurrency exchange (DEX), but a centralized exchange (CEX), whose project investments are subject to traditional regulation. What true Web 3.0 advocates is transparency and verifiability. For example, as a user of the FTX Japan exchange, I still do not know how to verify where user assets are stored and whether they are securely protected. I believe that decentralized exchanges are a better choice because users' wallets are always under their own control.

If individuals control their wallets in a secure MPC manner, there would be much less panic. And if investors participate as threshold-signing participants in the core fund operations of FTX, would reckless investments be prevented? Hopefully, we can learn how to survive in the market from this "earthquake" in the cryptocurrency space and collectively welcome the arrival of the Web 3.0 era.