Throughout 2023, the smoldering wreckage of the crypto exchange FTX has stood as a powerful symbol of crypto sector hubris after the exchange’s collapse served as a devastating blow to the industry’s self-confidence.
But now, after a year of soul-searching, survivors of the November 2022 crisis are ready to move on. And like the proverbial phoenix, a new crypto exchange is emerging from the ashes of FTX.
Although the trial of founder Sam Bankman-Fried concluded that FTX’s leadership pulled off one of the biggest fraud schemes in a generation, some of the company’s employees managed to survive the scandal with their reputations intact.
Having watched the company crash and burn from the front row, a group of former FTX executives now want to apply what they learned about how not to run a crypto exchange.
Captained by one-time FTX lawyer Can Sun, Trek Labs recently unveiled plans for a new platform: Backpack Exchange.
Building on the Solana-based Backpack wallet, a private beta version of the exchange went live on Sunday, October 12, with a public launch scheduled for Q1 2024.
According to Sun, Backpack hopes to position itself as an alternative to existing centralized exchanges. “In a post-FTX world, you need trust and transparency to create a true alternative to the other players,” he told the Wall Street Journal.
At the heart of FTX’s multibillion-dollar fraud scheme, a secret back door allowed Alameda Research to poach users’ assets to fund its trading activity.
But whereas FTX’s promise to safeguard users’ crypto turned out to be an illusion, the former Alameda software engineer and Backpack CEO Armani Ferrante envisages the new platform as “a wallet first and foremost.”
With trading capabilities serving as an “auxiliary component” to the Backpack’s asset custody service, during a recent panel discussion at Solana Breakpoint, Ferrante said the new exchange will employ multiple independent custodians, ensuring there is no “single point of failure.”
Although the need to maintain liquidity prevents exchanges from implementing true self-custody, Backpack’s multi-party approach is designed to reassure users that their assets are safe.
As Ferrante explained, the platform will split users’ assets between different entities, which also share responsibility for executing transactions. Like the decentralized validation protocols deployed by blockchains themselves, this model improves the platform’s overall security by distributing counterparty risk, he argued.
While the team behind Backpack have sought to distance themselves from their former employer, 3 US companies are bidding to acquire what’s left of FTX after the company’s liquidation.
Hoping to salvage the FTX brand, Bullish, Figure Technologies or Proof Group could win the right to relaunch the crypto exchange under new management.
Alongside the company’s brand assets, prospective buyers could also benefit from the exchange’s sizable customer base. But will users who lost money on the platform really want to give it another chance?
Arguing that relaunching the exchange could help creditors recover more of their losses than liquidation alone, a group of former users have banded together to lobby for an FTX reboot.
Proposals put forward by the FTX 2.0 Coalition include the introduction of a tradable Recovery Rights Token (RRT) that represents creditors’ claims and a plan to distribute equity in any new venture among users.
Pointing out that many FTX customers would have difficulty receiving USD disbursements, the group is also in favor of making claim payments in crypto through a relaunched exchange.