The spectacular downfall of FTX, which is the world’s second largest cryptocurrency exchange, is another black eye for blockchain, the burgeoning technology industry in Massachusetts.
Many investors are now worried lost all the money they placed with FTX, which froze the account and has filed for bankruptcy.
Cryptocurrencies, like Bitcoin, are built on a technology called blockchain, which is essentially a record of transactions maintained on a network of computers. It allows users to make digital transactions without an intermediary, like a bank. According to estimates from state lawmakers, the blockchain industry in Massachusetts is worth a stretch $12 billion as June.
When a scandal like the one in FTX happens, people in the industry will recoil.
“I’m like everyone else, I’m shocked,” said Steve Derezinski, the founder of Hashchat.xyz, a company that uses blockchain to send encrypted messages. “I think it will have a pleasant effect on the overall excitement of the area.
While cryptocurrencies aren’t the only way to use blockchain, those who don’t understand the technology tend to conflate the two, Derezinski said. He hopes that once the initial shock of the FTX flame-out wears off, more people will pay attention to blockchain projects beyond cryptocurrencies.
“I think there are still a lot of people who are ready to build and create new things,” he said.
Representative Kate Lipper-Garabedian, a Democratic state lawmaker from Melrose, said she was confident the block would remain in place.
“There are a lot of other practices that we can do that are going to be critical, and frankly, become integrated into the way we do business,” he said.
Some examples include the potential to authenticate and securely store legal documents, he explained.
Lipper-Garabedian recently filed a bill that would create a legislative commission on blockchain. If passed, the commission would be tasked with making recommendations to “properly support the industry.” That likely includes funding for education and workforce training in blockchain technology.
Lipper-Garabedian admits that events like the FTX scandal, after another crypto scandal, increasing pressure on lawmakers to regulate the industry. He expects state lawmakers to file more blockchain-related bills in the upcoming legislative session.
Blockchain enthusiasts are usually skeptical of government regulation, but recent accidents have dampened many people’s views. Investors, in particular, are not usually fans of volatile markets.
“No one is saying, ‘Let’s do whatever we want,'” said Giuseppe Stuto, founder of 186 Ventures, which has invested in several local blockchain startups. clarity, please.’ “
In the short term, Stuto said he expects many larger investors to reinvest in new blockchain ventures. In the long run, he believes that more research from investors will lead to more viable blockchain businesses.
“I actually think a lot of positives will come when the dust settles,” he said. “People will ask themselves whether it is worth working and building, so there will be a stronger focus on the right area.”
Rob Sarnie, who spent 23 years at Fidelity and now teaches financial technology at Worcester Polytechnic Institute, expects a change in the role of digital currency. Sarnie said the spread of the scam could lead to more people using cryptocurrency as a speculative asset or get-rich-quick scheme.
“I’m talking about where the price is?” he said. “With my password [U.S.] dollar … I know what it’s worth. I know the United States supports it.” Unlike cryptocurrency.
Sarnie still believes in the future of digital currency. But he said it could be in the form of government digital currency or stablecoins, a type of cryptocurrency pegged to the US dollar.
Boston-based Circle is the second largest stablecoin issuer in the world. The value of the currency, USDCremains stable despite recent cryptocurrency crashes.