Ethereum Co-Founder Joseph Lubin on NFTs and the Fall of FTX

The dangers of existing financial systems, and what happens after FTX

When asked for his thoughts about the recent fall of FTX, Lubin didn’t shy away from discussing the devastation and pain that it caused. He was also candid in noting the harm that it contributed to the NFT space — both to its image and to the individuals within it.

However, he was also quick to note that existing financial systems are also fraught with problems. “A lot of people have been harmed for millennia by bad centralized systems. You can hide information, you can cheat in so many different ways,” Lubin noted with a head shake. He continued by noting that, while the recent FTX debacle sent ripples throughout Web3, it is beneficial in that it highlights the importance of having decentralized systems. Centralized systems, he argued, are controlled by a single authority, which increases risk. “I’m grateful that it is going to enable us to drive a narrative that really lays out, in stark terms, the value of decentralization,” he said.

Lubin’s sentiments are far from rare in crypto circles. Amanda Cassatt, Founder of Serotonin and Former Chief Marketing Officer at Consensys, made similar statements in a recent article. Ultimately, she argued that centralized crypto companies are no different than the Big Banks, who have long played with — and lost — user funds. “These are all centralized exchanges and centralized financed platforms. Their business models are centuries old; the only new thing about them is they offer users exposure to crypto assets […] like the financial institutions that collapsed in 2008, their economic incentive is to under-collateralize and take risks with user funds,” she said.

But whether or not DeFi provides a more stable model, as Lubin and Cassatt claim, remains to be seen.

While Lubin joked that the crypto industry owes an enormous debt of gratitude to FTX’s Sam Bankman-Fried for “sacrificing himself,” so that we may collectively point to worst practices within the industry, he soon turned his attention to the NFT space. Drawing a parallel between the “irrational exuberance” of the dot-com boom and the often overhyped nature of the NFT community, Lubin noted that, as he sees it, Web3 is on the right track.

“We are now in this creative destruction phase where all the pieces get recombined, and a lot of people with expertise from the past few years are now figuring out the right things to do,“ said Lubin. “So we’re in this phase where we’re not dreaming about a future and telling people how great the future is going to be; we’re actually building.”