Sam Bankman-Fried, the founder of FTX, was the latest in a long and storied line of personalities whose compelling elevator pitches papered over their poor management practices.
Though it purported to raze the walled gardens of traditional finance, FTX was probably just garden variety fraud. In the aftermath of the exchange’s collapse, Congressman Patrick McHenry (R-NC) urged his colleagues “to separate out the bad actions of an individual from the good created by an industry and innovation.”
Alex Tapscott is a portfolio manager at Ninepoint Partners and the author of the new book “Web3: Charting the Internet’s Next Economic and Cultural Frontier” (Harper Collins), available now.
Rep. Tom Emmer (R-MN) called it “a failure of centralization, a failure of business ethics, and a crime. It is not a failure of technology.” As the trial unfolds and as more evidence comes to light, these early insights appear prescient and true.
Still, is it possible the collapse of FTX derails Web3’s growth?
Throughout history, promising innovations and even groundbreaking technologies have been sidelined by disasters, which change public perception. Chernobyl put a halt to new nuclear power projects which could have otherwise supplied the planet with abundant green energy. When the South Sea Company’s bubble burst in 1720, critics blamed its joint-stock structure as a high-risk legal invention; and governments banned their formation for a century.
Stung by those calamitous failures, people became NIMBYists [not in my backyard], choosing to halt all innovation rather than learn from their mistakes. These examples teach us that early failures and the response from governments can bend the arcs of technological adoption and diffusion, shortening their development horizons by years —or extending them by decades.
Is FTX Web3’s Chernobyl?
FTX punctuated an era. It’s time to forge anew
“Some people in crypto have acted for too long as if Web3 was a given, as if it would follow the same trajectory as the Web in the 1990s,” Albert Wenger of Union Square Ventures told me in an interview for my new book “Web3: Charting the Internet’s Next Economic and Cultural Frontier.” “There was no sales tax on the iternet. There was the safe harbor of the Digital Millennium Copyright Act…