The aftermath of the FTX: Is blockchain doomed to die?

Temitope Akintade
Is Blockchain Dead?

In the wake of the FTX scandal that has shaken the financial industry to its roots in the last two weeks, the blockchain community is inundated with beautiful epitaphs paying tributes to a nascent sector that has not even peaked. 

The interesting part of these ‘blockchain is dead’ chants is that they now come every market day. It’s becoming a recurring theme that whenever the market experiences a setback or one of the firms in this burgeoning sector faces hardship, the next thing is for no-bitcoiners to start reiterating how the whole concept of blockchain is a fluke, a fad that will definitely go up in smokes with time. 

Remember how the industry was written off in 2011 when Bitcoin crashed from $32 to $0.01 in the course of a few days?

Also, the crypto winter of 2017 should still be fresh in the memory of keen observers. After hitting $20,000 in December 2017, it lost over 70% of its market value and plunged to $3200 in 2018. All to the tunes of the ‘blockchain is dead’ chant.

Everyone in the crypto space remembers the iconic Terra crash earlier this year. Those chants arguably climaxed during and after the unfortunate occurrence. But, here we are after six months, with the technology behind the blockchain still standing strong, listening to another remix of the ‘blockchain is dead’ chant which was inspired by the FTX collapse.

Related post: Will the FTX crash affect stablecoins? 

If you’ve been around the financial industry and have been paying significant attention, you would understand that this is just a phase in the development process of this nascent sector. As a matter of fact, other established sectors like traditional finance, telecommunications, oil and gas have witnessed far more declines, but they are still in existence today. 

A chronicle of bankruptcy

A cursory glance at history shows that FTX and Terra are not the first companies that would collapse or file for bankruptcy. In fact, there are far more established firms in stabler sectors that have bitten the dust. 

Blockchain bankruptcy

A quintessential example is Lehman Brothers whose total assets at the time it filed for bankruptcy in September 2008 were $691.1 billion.

Lehman Brothers were the fourth biggest investment bank in the United States until the time of its demise and had been in existence for 158 years before finally filing for bankruptcy. The reasons behind the bankruptcy were: its involvement in the subprime mortgage crisis (which was the basis for the 2008 recession), downgrading of assets by credit rating agencies, loss of confidence and major loss of stock value. 

Due to these reasons, the company lost out on most of its clients, who moved to different banks and hence, had no choice but to declare bankruptcy. It also had 25,000 employees, who were suddenly terminated as the enormity of the situation was felt by everyone. 

Fourteen years later, it remains one of the most famous bankruptcies in the world, and definitely, the biggest but the investment banking sector in the United States and indeed in the world is not dead. It is rather waxing stronger. 

Also, WorldCom was the second biggest telecom company (after AT&T) in the US in its heyday. However, it was embroiled in a major accounting scandal in 2002, where fraudulent methods were used to hide the loss of earnings of the company.

The subsequent furore and attention surrounding the company saw the company declare bankruptcy. Its total assets at the time of bankruptcy were $103.9 billion. But guess what, the telecommunications industry is still standing strong at press time. 

Washington Mutual was a savings bank holding company and was also the owner of the biggest savings and loan association in the United States. Just like Lehman Brothers, the company’s downfall came as a result of its involvement in the subprime mortgage crisis, which led to a major loss in the value of the company stock, as well as the termination of thousands of employees. 

When customers lost confidence in the bank, they withdrew nearly $17 billion in cash, which led to the Federal Deposit Insurance Corporation coming in, seizing assets of the company and eventually, selling it to JP Morgan Chase. Its total assets at the time of bankruptcy in September 2008 were $327.9 billion. 

MF Global, a financial derivatives broker, was one of the biggest companies in the industry. Liquidity issues, fines and penalties started to affect the profits as well as the reputation of the company, resulting in its bankruptcy in 2011.

In a similar scenario with FTX, Refco was a financial services company in New York and the company ended up declaring bankruptcy due to its CEO hiding 430 million in bad debts. Its total assets at the time of bankruptcy(October 2005) were $33.33 billion.


What can be extracted from the analysis above is that the ‘death’ of a firm is not the end of that sector. Safe to say the crises which affected the bankrupt firms shook their respective sectors, and those sectors are still in existence today.

So why declare death on the burgeoning blockchain industry when other sectors have survived what we are currently experiencing?

Is blockchain dead?

Read also: Lucky Uwakwe of Sabi Groups speaks on FTX crash and vulnerabilities of centralised exchanges 

It is an established fact that businesses fail and fail often. However, once a sector becomes firmly established and entrenched, the odds of firms failing fall significantly with time. The blockchain industry, despite existing for a little over a dozen years, has a plethora of international companies that are heavily reliant on it. 

According to Blockdata in October 2022, top institutions like Microsoft, Visa, Nike, Oracle, PayPal, Morgan Stanley, JP Morgan Chase & co, MasterCard, T-Mobile, Toyota, Alphabet, Chevron, Shell and many others utilise the blockchain for their day to day operations. 

The fact that over 100 international companies are exploring decentralisation and Web3 applications is one of many proofs that this technology has a bright future.

Despite the market downturn being experienced, there remain billions of dollars of capital, thousands of builders and entrepreneurs, and millions of ideas to make the world a better place on the blockchain. Blockchain is not dead and will never die. 

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