The Big Whale: FTX has just gone bankrupt in what appears to be a massive scam. What is your take on the case?

Pascal Gauthier: It's a very complicated situation because we don't have all the elements yet. What is certain is that there are many victims and that all this could have been avoided if the cryptos were well secured. That's what we've been saying for seven years at Ledger.

You have to realize that at FTX only a few people could access and handle the funds of over a million customers. That's just crazy. Fortunately not all exchanges work like this. When you go to Kraken, they advise you to keep your cryptos yourself.

Does this case mark the end of centralized platforms?

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For years there has been a debate between centralization and decentralization.

We have been sensing lately that centralization was the way to go with big players like FTX becoming really big, with crazy valuations ($32 billion for FTX before the scandal, ed.), and considerable influence.

In the United States, Sam Bankman-Fried had become one of the privileged interlocutors of regulators and authorities, especially on the subject of regulation. SBFs and other players in the ecosystem have been using crypto jargon for months to give themselves credibility, to make themselves unavoidable, when in reality they have little to do with the "real" crypto.

FTX is just a very classic, centralized marketplace... We had the same example with Celsius in the spring. For months they talked about "DeFi", "decentralization" to promote an ultra centralized product, exactly like FTX.

How can we explain the success of these players with regulators?

They speak the same language. It's very comfortable for a regulator to have a crypto player come in with a centralized solution. SBF was the poster child in the US because it was exactly what the regulators wanted to see and hear.

Perhaps the best example is what he said about Bitcoin this summer (he said Bitcoin was not a good payment solution, ed.). When we heard him, we thought he absolutely did not believe in the value proposition of cryptocurrencies and decentralization. SBF was just in it to make money.

Since the fall of FTX, Ledger has been the talk of the town. Why?

The best way to learn that fire burns is to burn yourself. You burn yourself once, and then you'll see that you won't do it again. That's exactly what just happened with FTX.

A lot of investors knew there was a risk and they just experienced it. Some lost a lot of money, and they won't want that to happen again, so they're taking a Ledger. The number of people who have turned to us since the crash is insane.

It's been more than a week of record-breaking days, with daily sales of tens of thousands of Nano (usually a few thousand). And it's not just hardware sales that are soaring: the Ledger Live app, which allows you to manage the cryptos stored in a Ledger, has been downloaded more than a million times in recent weeks.

You don't have supply problems?

We have anticipated everything with production lines, stocks, suppliers... Everything has been thought out for this kind of situation. The pace has increased and we have been able to manage it.

And what about the other exchanges? We have seen that several of them like Binance wanted to set up more transparent solutions...

It's all very well to want to improve things, to talk about "Proof of Reserves", but you have to keep one thing in mind: platforms should be used to buy and sell cryptos, not to store them.

We have set up a custody solution for companies (notably exchanges) with Nomura and CoinShares called Komainu. This system, which works with Ledger security, ensures the preservation of keys as well as good governance to avoid cases like FTX.

Users are right to want more security, but we must know what security we are talking about. An exchange has two solutions: either it takes a Ledger-like system, or it entrusts its corners to Komainu, which is an independent structure secured by a technology like ours. The rest is not at the level.

Do you think the FTX case will change everything?

This is an important moment for the industry. It would be a big mistake to think that exchanges can just "trust me" with a few changes like the implementation of the "Proof of Reserve" which, I remind you, allows to show that there are funds at a given moment, but does not prevent to transfer these funds right after...

The real solution would be to have a clear separation of curation and exchange activities. After that if people want to go into DeFi, that's another story. With Uniswap and Paraswap you can do your crypto swaps and then you get them back into your Ledger.

Mastering DeFi and owning your cryptos yourself is not necessarily easy. There are risks that come with owning your cryptos. Don't intermediaries have a bit of a positive?

Yes, of course, but it all depends on what the intermediaries bring to the table, and in terms of conservation, it's really very questionable, to say the least...

What's very interesting is that a lot of people refuse to unlearn what they learned with Web2. But once they take the plunge, once they understand how it works, it becomes obvious to them. It's just a matter of education. Web3 was behind in terms of user experience and usability. We're working on it.

What is the objective?

We've always said we want to do with the wallet what Apple has done with the smartphone. Apple sells 250 million devices a year. That's a good goal for us, I think (laughs). But to get to that goal, we're already going to sell a few tens of millions of devices a year.

At the moment, we have sold 5.5 million Nano's, and we hope to exceed 15 or 20 million soon, with the objective of selling 10 million Nano's each year. After that, to reach Apple's level, we'll have to integrate them into phones and computers, and we're working on that.

Will the crypto sector be permanently impacted by the case?

The FTX case is a huge fraud and has nothing to do with crypto. It's interesting to see that the market didn't react that much. It went down, but compared to the size of the scandal, it is not significant. The fundamentals are still there, and we can even expect much better practices in the coming months and years.

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