As the dust from the FTX crisis settles, many in the crypto industry are pointing to the exchange’s collapse as a failure of centralization.
Joe Lubin, the co-founder of Ethereum and founder of the software company ConsenSys, told Fortune that FTX was about abuse of power and opportunity, making its bankruptcy more like Enron and WorldCom than something stemming from a decentralized protocol.
He called the recent cascading set of collapses, such as Terra-Luna, fortunate, saying they’ve “enabled the crappier elements of our ecosystem to be exposed.”
“A lot of the rot will get cleaned out,” he added.
While Lubin has been an advocate for decentralization through his work on the Ethereum ecosystem and different products produced by ConsenSys, the company’s premiere software offering, MetaMask, has come under fire recently. The company revealed that it collects user data, such as IP addresses and Ethereum wallet addresses, when using Infura, another ConsenSys product that serves as the default RPC provider, a protocol for requesting blockchain data.
MetaMask, a crypto wallet for the Ethereum blockchain that allows users to control their private keys, is popular in the DeFi space, with 30 million active users, which amplified the criticism.
For Coindesk, Sam Kessler wrote that the controversy “serves as a harsh reminder of a hard truth that the crypto industry must face as it rebuilds from the FTX rubble: Centralized intermediaries have seeped deep into the crypto user experience.”
In an interview with Fortune, Lubin defended the activity, clarifying that ConsenSys has never monetized, commercialized, or sold user data. He said that when users send a transaction, the software needs to associate it with an IP address to send the information to MetaMask so it displays properly, such as when a transaction doesn’t get processed immediately.
He also pointed to the need to hold IP addresses, so users don’t use the software in a “spammy or exploitative way,” such as through denial-of-service attacks.
Lubin said the pushback has caused ConsenSys to adjust its priorities. The company is looking into how to reduce the amount of time its software holds information, expunging it from databases as soon as possible but without damaging the service.
“We’ve accelerated our activities based on recent intensity of the discussion,” he said.
On Tuesday, ConsenSys provided an update, announcing that it was working to narrow data retention and rolling out a new advanced settings page that would allow all new users to choose their own RPC provider.
Despite the recent volatility in crypto markets, precipitated by FTX’s bankruptcy and the ensuing contagion to related companies like BlockFi, Lubin told Fortune that he’s optimistic that the worst has passed, saying that the “most intense paranoia and deepest FUD” happened the week of Nov. 21.
He said that there are companies out there that should “clean up their act” and take decentralization more seriously, although he declined to name any. He cited the recent push for proof of reserves among exchanges as a positive step forward, adding that he agreed with recent criticism from industry leaders such as Kraken founder Jesse Powell that any such disclosures must include liabilities. Lubin also called for an industry-driven protocol that could expose liabilities in a way that’s not a competitive disadvantage.
“We can self-regulate,” he told Fortune, “but certainly nothing wrong with regulators getting involved and helping to drive the discussion.”
