Bitcoin, the pioneer digital currency, is the first-ever functioning implementation of blockchain technology. Both carry immense potential and power to change the world, and tech firms worldwide seek to find even an inch of advantage in their development.
The explosive growth of blockchain has made the development of other emerging technologies faster, such as the metaverse, artificial intelligence (AI), and the Internet of Things (IoT). While before, they were decades into the future; they are now within reach in the next five years or so. However, with all things that carry great power, blockchain can also be used irresponsibly.
This is what Professor Eugene Soltes, Integrity Lab founder and Harvard Business School professor, believes in his discussion during the “DNA of BSV” Twitter Space session hosted by blockchain research firm nChain CEO Christen Ager-Hanssen. Here, Soltes talks about the difference between people who want to use blockchain for good and those who use it irresponsibly.
Soltes talked about such to shed light on the recent FTX collapse, which he believes to be the result of its leaders’ self-serving desires and messaging. He also emphasizes how these bad actors expressed their desire to make money through speculation and “questionable” business practices.
Soltes concludes that it is “irresponsible innovation” that led to the multi-billion-dollar collapse of FTX. Responsible innovators are the ones who can keep their focus sharp on what they originally wanted to achieve without being blinded by fame and wealth in the process. FTX CEO Sam Bankman-Fried (SBF), and FTX in general, failed at being “responsible innovators,” a tragedy that Soltes laments.
From being the official crypto platform of the NBA’s Golden State Warriors to filing for bankruptcy, the FTX collapse marked one of the biggest frauds in crypto history. Late last year, the Bahamas froze FTX’s assets, arrested SBF, and jailed him for multiple fraud charges. The crypto market was shaken with billions of dollars of value lost by FTX investors and users and a massive $1 trillion drop in crypto in November.
A scoop from CoinDesk also revealed that the SBF-ran trading firm Alameda Research held a position with $5 billion in FTX’s native token, FTT. The report revealed that Alameda’s investment foundation was also in FTT but not in any other cryptocurrency. This suspicious investment prompted concerns across the crypto industry regarding SBF’s companies and their undisclosed leverage and solvency.
Soltes used FTX as a prime example of what “irresponsible innovation” is. The questionable control system of FTX is fascinating to a fault. Such a control system, wherein the decision-making largely lies in the hands of a single person, undermines whatever doubts were raised by spectators of FTX.
“What I have found so fascinating to be reading about the controls, or the alleged lack thereof, raises a lot of fascinating questions. On the one hand, what we’re seeing right now is that these quickly get undermined, with the questions emerging around the approval of asserts literally by emojis and unknown acquisition,” Soltes explained.
“There was one line in the bankruptcy report that suggested that they were using third-party sources, i.e., the media, to actually even figure out what investments were made. There are just so many questions about the basic requirements of an operation that literally had billions of dollars of assets,” Soltes added.
This is what happens when a centralized exchange takes charge of digital assets and disregards the weight of accountability, responsibility, and transparency. When one realizes that working with technology that promotes a decentralized system where transactions are low-cost, accountability is held high, and transparency is held at a premium, massive blunders such as FTX’s could have been avoided.
