Students, faculty talk about future cryptocurrency after FTX collapse

In November 2022, former cryptocurrency exchange FTX filed for bankruptcy after the company had mismanaged its funds. More than one million people may have lost money as a result of the collapse.

However, after FTX’s rapid fallout, some students and faculty in the Northwest do not believe the reputation of Blockchain, cryptocurrency’s underlying record transaction technology, or the industry itself will be adversely affected in the long term.

“There are definitely doubts after the collapse of FTX regarding the volatility of the industry,” Tony Luo, Weinberg senior and NU Blockchain Group president, said. “What is the future of cryptocurrency or blockchain technology in general? But personally, I think it’s just part of the cycle of a relatively young industry where many regulations have not been in place.”

Founded in 2017, NU Blockchain Group aims to be a hub for students interested in blockchain technology. The group, which organizes speaking events and works on blockchain projects, has not been completely unaffected by the fall of FTX or Luna in May 2022 crypto crash,” Luo said.

As a result of the Luna crash, Luo said the group has been unable to receive funding from a startup that previously backed it. Other groups or companies affected by the market downturn may also no longer choose to partner with the student organization for projects or participate in speaking events, Luo said.

Although the NU Blockchain Group does not invest in cryptocurrencies as an organization, some students involved lost money as a result of the FTX fallout, said the organization’s treasurer and McCormick sophomore Eagan Notokusumo. In response, he said the group’s priorities revolved around supporting those who are financially affected.

“From the start, we’ve prioritized risk management in what we do, making sure that if we take on projects, we do our due diligence and make sure they’re not scams,” Notokusumo said.

He added that members of the NU Blockchain Group who had been involved in the cryptocurrency space since 2017 or 2018 were less skeptical of the industry after FTX’s decline and saw the situation as just another market drop. However, newer members were more hesitant, and the NU Blockchain Group saw a decline in meeting attendance late in the fall quarter as a result.

McCormick Prof. Dongning Guo, who teaches Computer Engineering 334: Fundamentals of Blockchain and Decentralization, said that although the market value of cryptocurrencies using Blockchain has fluctuated over the past 10 years, people are still eager to invest in the currency.

Guo doesn’t think the recent uproar with FTX and Luna will deter people from investing in cryptocurrencies, although the practice still carries some degree of risk.

“A lot of people who have lost their money anyway can afford it. This is their extra money investing in the market,” Guo said. “But of course there are other people too, so it’s sad that they lost a lot of their savings, and it’s very hard to get it back.”

He said that there will likely be more regulations on cryptocurrency transactions in the future to prevent future cases of fraud, as was the case with FTX.

Newer industries, such as cryptocurrency, are more prone to fraud incidents, Guo said. But given the decentralized nature of Blockchain technology, he added that a company like FTX may have appealed to investors because of its more centralized model.

Still, Guo said it is fortunate that the FTX collapse was “relatively limited” and did not trigger market sell-offs like stocks and bonds. Some cryptocurrency companies, such as Bitcoin, have recouped all losses since FTX went bankrupt.

“The market is generally healthy in that sense and is resilient to just one big failure,” Guo said.

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