Decrypt’s Art, Fashion, and Entertainment Hub.
As the collapse of the crypto exchange FTX shakes faith in the industry’s centralized players, Telegram is stepping in to build trustless and decentralized alternatives.
In his Telegram channel on Wednesday, Pavel Durov—the messaging platform’s founder and CEO—announced that the company would begin building “non-custodial wallets” and “decentralized exchanges” that would let millions of users safely trade their crypto.
“This way we can fix the wrongs caused by the excessive centralization, which let down hundreds of thousands of cryptocurrency users,” said Durov.
The executive argued that the project should be more than feasible: the development of Fragment, Telegram’s decentralized auction platform, “took only 5 weeks and 5 people, including myself,” according to Durov.
The marketplace, which launched last month, has already raked in $50 million worth of Toncoin by selling tokenized usernames on the blockchain. It operates over The Open Network (TON)—the spiritual successor of Telegram’s former blockchain ambitions that were squashed by the SEC years ago.
Rallying the developer community, Durov called for steering the industry back towards decentralized applications and away from having to trust third parties. Reliance on centralized entities, he said, caused many to lose their money in FTX’s bankruptcy at “the hands of a few who began to abuse their power.”
FTX has been accused of mismanaging client funds by lending them out to its sister trading desk Alameda Research—a no-no for firms in the exchange business. Other exchanges are now scrambling to implement better checks and balances at their firms, including proof of reserves systems that attempt to verify possession of client funds on-chain.
Cardano founder Charles Hoskinson echoed Durov’s same argument regarding FTX at the Financial Times Crypto and Digital Assets Summit on Wednesday.
“The failures we’re having aren’t failures of protocols, aren’t failures of DeFi,” Hoskinson said. “They’re failures of trust, they’re failures of regulation, they’re failures of people.”
Crypto users appear to feel the same. JP Morgan analysts observed a “severe” draining of funds from other centralized exchanges after FTX filed for bankruptcy, including Gemini, OKX and Crypto.com.
FTX’s collapse has also triggered a crypto contagion affecting numerous centralized crypto lending firms. BlockFi has already filed for bankruptcy, while other trading desks like Genesis have frozen withdrawals.