Security Lesson: How the FTX Crisis Redefined Industry Standards in Cryptocurrency

The cryptocurrency industry has reached a crucial inflection point following the collapse of FTX. What was once a minor concern — the need for robust asset verification mechanisms — has become a strategic priority for global trading platforms.

Lin Han and Gate’s Forward-Thinking on Security

Gate founder Lin Han recently acknowledged that the platform had already implemented proof of reserves based on Merkle trees since 2020. At that time, adoption was limited — few players in the market shared this concern. The landscape has changed dramatically. The FTX disaster served as a catalyst, forcing the entire industry to recognize the urgency of transparent asset protocols.

The Security Standard the Industry Now Pursues

According to Lin Han, a comprehensive proof of reserves system (PoR) goes beyond simple checks. The ideal model should combine:

• Merkle Trees: For efficient verification of the asset hierarchy
• Zero-Knowledge Proofs: Ensuring transparency without exposing sensitive data
• Open Source Code: Allowing community audits
• Independent Third-Party Audits: Continuous external validation

This integrated approach is not only technically superior — it is ethically imperative. Platforms that adopt only one or two of these measures leave significant security gaps.

The Pending Path for the Industry

Currently, the reality is challenging: few exchanges have fully implemented this set of practices. Most still operate with partial or insufficient checks. This presents both a problem and an opportunity — there is considerable room for platforms to differentiate themselves through more rigorous security standards.

The FTX collapse was not just a market event. It was a milestone that should have permanently transformed how the industry approaches asset custody and user trust. Lin Han and Gate understood this years ago. Now, the entire industry must act.