The FTX implosion has sent shockwaves across the crypto world. And, these ripples aren’t simply financial. Sure, the market has seen billions of dollars drained from it since the company’s bankruptcy. But, there’s an ethical dilemma at the heart of the news as well. Centralization of power in the crypto world is once again called into question. Telegram is looking to dismantle this centralization with its own pair of crypto products.
Crypto exchange FTX’s demise came as a direct result of its centralization. FTX and its sibling company Alameda Research were using their power to stake clients’ cryptocurrency while they were holding the assets on the exchange. When it came out that these assets were illiquid, a bank run put FTX into massive debt and triggered its bankruptcy.
Now, had FTX not been a centralized exchange, there wouldn’t have been employees with this type of power to use assets behind their owners’ backs. High concentration of power, as has been proven time and again — from FTX to simple rug pull scams — is the single most dangerous trait of a crypto project.
Encrypted messaging service Telegram has taken note of this, and it’s using the news to announce its coming crypto wallet and exchange services. Using its own blockchain, The Open Network (TON-USD), the company will be building what it calls a fully decentralized, non-custodial wallet app and a crypto trading floor.
FTX Fallout Has Investors and Developers Alike Seeking Answers
The increasingly popular messaging app developer is hoping to attract the scores of investors spurned by FTX and other centralized exchange implosions over the last year. Telegram founder and CEO Pavel Durov released the statement on Wednesday.
“Telegram’s next step is to build a set of decentralized tools, including non-custodial wallets and decentralized exchanges for millions of people to securely trade and store cryptocurrencies. This way we can fix the wrongs caused by the excessive centralization, which let down hundreds of thousands of cryptocurrency users.”
Not sparing anybody, Durov has been highly critical of most every crypto project. He is scolding Ethereum (ETH-USD) at the same time as FTX, saying that developers have not improved upon the network enough even with the Merge upgrade. Meanwhile, Telegram has continued to improve upon its own chain with a decentralized auction service which has seen over $50 million in trades since launching in October.
Indeed, Durov seems to be on the nose with his criticisms; the prevalence of third-party support and centralization in the world of crypto exchanges has gone unchecked. And as long as it remains as such, investors are more likely to see stories like FTX’s.
And, as experts point out, an industry-wide shift away from dependence on centralized exchanges will take years to accomplish. It would be far more easy for a company like Telegram to build its exchange now and be fully decentralized right out of the gate than for a centralized exchange to cede power — especially a larger platform. And with the growing prevalence of Telegram’s messaging platform, particularly among the crypto community, it will have millions of users already on its services when trading opens.
On the date of publication, Brenden Rearick did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
