Another "black week" in the crypto sphere
6th of November 2022: It's been two months since we launched our web3 banking offer. We are onboarding dozens of crypto businesses. Another exciting day in the "multiverse." But as we know, we're never safe from a curveball. Binance announced that it would sell its entire position in FTT tokens — roughly 23 million FTT tokens worth about $529 million. Binance CEO "CZ” declared the decision is based on risk management following the collapse of the Terra (LUNA) crypto token earlier in 2022. Enough suspicion was raised in the crypto ecosystem to take a closer look at FTX.
A few days later, CoinDesk published a report highlighting potential leverage and solvency concerns involving trading firm Alameda Research.
In less than a week, FTX faced a liquidity crisis. They announced they were looking for bailout funds, received a non-binding offer from Binance, who refused to buy after taking a look at the company's finances.
11th of November 2022: FTX’s CEO known as "SBF" stepped down, and the company filed for bankruptcy. In the following hours, FTX experienced a possible hack. Hundreds of millions of tokens were stolen.
14th of December 2022: SBF arrested in The Bahamas. Police said he was arrested for "financial offenses" against laws in the US and The Bahamas.
The impact on our space
Navigating the new bear market
The FTX scandal had an immediate effect on all the crypto markets. The total market cap lost billions in a week. Early events in 2022 started the 2022 bear market. The FTX collapse made it worse. In many ways, FTX built a bank with the same inner flaws but no regulatory oversight. This obviously generated skepticism towards the industry and many media outlets even mentioned the end of crypto.
We believe this is noise, we've heard it before. It's cyclical. At Multis, we consider bear markets as a blessing for builders as it filters out bad actors. Take a look at this article from our CEO in 2019.
Towards a new challenge: recreating and promoting a trustworthy environment
Crypto has suffered from a bad reputation since day one. Some people call it a Ponzi scheme. The FTX collapse is a perfect argument for those detractors. It creates a massive distrust in the industry and distracts from the real interest being web3 and decentralized ownership. One proof of that is that Twitter talks have been all about the millions stolen by SBF recently, not about the incredible potential of a decentralized web.
A great example of the distrust created for web3 companies is traditional banks' actions after the FTX collapse. Take a look for yourself. 👇
The FTX scandal has highlighted the improvements our industry needs. If we want billions of people to adopt web3, we must avoid events like this. And some suggestions appeared quickly. Many industry leaders offered solutions to counter potential new scandals. One of the most interesting is from Vitalik Buterin himself. He offered proof of solvency. You should check his excellent paper on it: Having a safe CEX.
The importance of decentralization — a crucial step for fund security
FTX was a centralized exchange. Multis' philosophy resonates more than ever: "not your keys, not your coins".
FTX collapse triggered a comeback on one of the biggest debate in crypto: centralization vs. decentralization. The following graph illustrates the overall trend of crypto holders moving their funds to decentralized wallets:
Also, daily visits on Ledger have tripled in the days following FTX’s debacle.
This is a huge signal. Decentralization is THE solution. Self-custodial wallets are gaining ground but there is still the same question: "How can crypto become mainstream with the complexity of key holding?". And that's exactly why we created Multis and why we are pioneering a new way to do banking.
The self-custodial conviction at Multis
Multis: the safety of Gnosis wallet with a user-friendly experience
From the very start, Thibaut and former CTO Theo made the decision to build on top of decentralized wallets. Why? We strongly believe that they're a cure to the problems the market is facing today.
The goal of blockchain technology is to give back control to end-users — and we've been building towards that since day one. Hence the fact that we decided to work with decentralized wallets, which pushes in that direction.
However, handling a non-custodial wallet can be a challenge for newcomers — we want to alleviate that pain. Access to fund security should be a given for everyone. As an answer, Multis is removing the native complexity of non-custodial wallets to bring them to new companies in the space.
Your crypto funds are in the safest place at Multis. We are built on top of Gnosis safe, the gold standard of self-custodial wallets. We do not hold your keys, and therefore neither your crypto. This also means we cannot undertake any actions on your funds (lending or trading for instance).
What about our web3 banking offer? When we decided to build a web3 banking offer, we knew that dealing with fiat would be challenging. We knew we needed the strongest infrastructure to reassure our users on their fund safety. Driven by the same conviction of fund safety, we chose FDIC-insured accounts. What is FDIC insurance? The FDIC protects the money-depositors funds in insured banks in the unlikely event of an insured-bank failure. Multis has your back. In crypto or fiat.
Let's BUIDL
The FTX scandal is currently shaking the ecosystem. And if you were still in doubt, the bear market is definitely here. Regulation will be tougher (for the better). Building back the trust will take time. Traditional media outlets will keep calling names, but we're in it for the long run, and for good reasons.
Crypto is here to stay, and this chain of events is tough but will benefit the space. We are even more bullish on our stance - Let’s BUIDL!
Check our website blog. if you’re interested!