Former FTX CEO Sam Bankman-Fried (Danny Nelson/CoinDesk)
What a horrible couple of weeks. Very few of us have not passed through some degree of surprise, disbelief, shock, anger, sadness, fear and betrayal. Many, tragically, have had life-changing amounts of money disappear, at a time of peak economic uncertainty. Even those more fortunate are reeling from a toxic combination of dismay, disgust and perhaps depression.
We’ve also had to deal with a handful of outsiders declaring, “Told you so!” and “Crypto should die.” Critics are plenty right to point out the hubris, ego and lack of common sense that, yes, is prevalent in our industry. But the gleeful victory lap from skeptics compounds our embarrassment and shame.
Now we need to think about moving on. No, it’s not too soon.
The first step involves, well, figuring out the first step. In my opinion, it involves clearing up one significant misconception: that “we” are going to come up with “a solution.”
I have been asked often over the past week: “How can we make sure this doesn’t happen again?” My response is, who is “we” here?
Crypto has never spoken with one voice, and it’s not going to start doing so now. Even the idea that consensus for such a diverse ecosystem is an ideal outcome is disconcerting. The origin of the industry is based on the free-market ideology that people should be able to choose their methods of transaction and representations of value, and that experimentation can directly test new incentives and forms of governance in a real market. It is up to us to evaluate risks – we may be bad at doing so, but we hopefully learn from mistakes and end up gravitating toward more reliable actors.
And what do we mean by “make sure”? Those words imply a level of control that goes against crypto’s originating ethos. How do we ensure mistakes are not made? By dampening innovation and insisting on mass obedience to a strict set of often impractical rules. Parents know this dilemma: You can make sure your kids don’t get hurt by letting them play only under your supervision, and even then with lots of padding. But what kind of a life is that for them, or you? Instead, you can teach them to do what they can to minimize risk, and when they fall, get back up again and recalibrate.
The crypto industry will make mistakes again, as it should, because that is an integral part of experimentation. Participants can learn to be more careful, take less at face value, distrust the aura of celebrity, question established beliefs and research alternatives. But let’s be realistic. We’re human, most of us seek convenience over safety, and we instinctively trust our friends. So, we can’t “make sure” this doesn’t happen again, and nor should we insist on that. The best we can hope for is that we’re smarter and more demanding in future, because no one wants to repeat the past few months.
Free market imperative
So it’s time to reframe the question in more free-market terms. Instead of ineffectually grasping for a communal answer, how about: What can I do to improve the industry? What can I do to protect myself better? What can I do to help others?
Another question I get often is: “What should we do now?” This is natural. We want a solution, and we want someone to give it to us. Many think the solution is regulation, which means we’re walking into a situation the authorities have long expected. Regulation is not the full answer – rules did not stop Enron, Bernie Madoff, MF Global, Archegos and similar catastrophic examples from happening. But our instinct is to run to the powers-that-be for safety.
Yet, even from their point of view, there is no consensus. An editorial in the Financial Times last week suggested that “we should simply let crypto burn.” Who the “we” is in that phrase is unclear. Who has enough authority to just “let crypto burn?” No one. Some regulators see a threat worth curtailing. Many (including the new House of Representatives majority whip and the incoming head of the House Financial Services Committee) see innovation worth supporting. Others just don’t care. There is no “we.”
This recent emphasis on the plural pronoun is understandable: We all seek comfort in the group in times of fear. But it is also dangerous because emotional mobs can wreak havoc. Scrolling through Twitter over the past couple of days, I saw signs of an industry turning against itself, a mass purge disguised as an attempt at community protection. History tells us this is rarely useful.
So let’s stop stressing about what “we” want, because there is no “we” with the authority to decide what that even is. What we can do is use our individual priorities and abilities to help fix what we feel needs fixing. We don’t need consensus or permission for that.
Speaking for myself, I am going to work so hard to continue explaining our industry to anyone interested, to poke holes in easy conclusions and to question investment orthodoxies. It’s what I can do. And all of you reading this have talents you can apply, even outside the crypto sphere, to further whatever characteristics you would like to see more of here.
It’s time to drag ourselves away from doomscrolling and the instinctive fascination with deranged tweets. It’s time to look beyond the gloom of the current newsfeed. It’s time for us all to dust ourselves off, take care of our wounds and get back to work. It’s time to focus on what’s next.