- Vitalik warns FTX collapsed because a small centralized group controlled funds without transparency or community oversight.
- Ethereum relies on open governance and public review, reducing dependence on any single authority.
- FTX’s downfall accelerated adoption of decentralized exchanges as users seek trustless, non-custodial platforms.
Ethereum co-founder Vitalik Buterin used his appearance at Devconnect Argentina to argue that the failure of FTX demonstrated the risks of centralized control in crypto platforms. He said the exchange’s collapse came from decisions made by a small group, which contrasted sharply with Ethereum’s open governance structure. His remarks came as Ethereum’s price continued sliding, with ETH dropping below $3,000 after falling 39% since August.
Buterin Points to Centralized Failures at FTX
Buterin began his address by referencing a public quote from former FTX CEO Sam Bankman-Fried. He said the exchange’s operations moved in a very different direction from the image its leadership presented.
According to him, FTX required users to trust a small decision-making circle that controlled customer funds without transparent oversight. He then pointed to court findings that described how FTX transferred billions in customer assets to Alameda Research to offset losses.
That detail introduced his focus on the consequences of those concealed transfers. The case eventually led to Bankman-Fried’s 25-year sentence for fraud, money laundering, and conspiracy.
These events shaped Buterin’s argument that FTX reflected the vulnerabilities of centralized custody. He said the structure left users unaware of critical decisions until consequences emerged.
Ethereum Governance Built Around Public Review
Buterin then changed to Ethereum’s structure. He said the network depends on proposals reviewed and debated by contributors across the ecosystem. That process, he explained, reduces dependence on any single authority and allows for public scrutiny at every stage.
Each upgrade, he said, moves through testing phases and community discussion. This explanation changed the conversation to how investors behave following the FTX collapse. Buterin noted increased skepticism toward centralized exchanges among traders.
He noted rising use of decentralized exchanges and referenced Hyperliquid, a platform that appeared after FTX’s failure. Hyperliquid founder Jeff Yan said the collapse encouraged users to choose systems that do not rely on one operator.
Community-Based Networks
Buterin emphasized that Ethereum operates as a community instead of a company. He explained that traditional companies concentrate decision-making through a central hub, while communities distribute responsibility. This structure, he said, makes hidden actions less feasible.
He added that the difference also aligned with broader shifts across the sector. The rise of decentralized exchanges, he said, connected directly to Ethereum’s long-standing approach to open participation.
