Last June, Ethan Parker strolled through a West Palm Beach crypto conference and felt a growing unease as he passed the vacant booth of Terra LUNA—which had once been a go-to, trusted stablecoin. “It was eerie,” says Parker, co-founder of Giddy, a Salt Lake City-based decentralized crypto wallet.
Last spring’s implosion of Terra LUNA—which resulted in investors losing $60 billion—was just the beginning. The last six months of 2022 ushered in a series of crypto meltdowns, including the bankruptcy of crypto lender Celsius, hedge fund Three Arrows Capital, and broker Voyager. In November came the FTX disaster: the $32 billion crypto exchange filed for bankruptcy in what many called a “Lehman Brothers Moment.” More than 1 million people lost their money, and its former boss, Sam Bankman-Fried, was arrested in the Bahamas and charged with wire fraud, securities fraud, and money laundering.
Despite the deep chill in the cryptocurrency markets, some Utah entrepreneurs and lawmakers are still bullish on blockchain and its future. “Crypto is not dead,” Parker says.
The crypto collapse has actually positioned Giddy in a sweet spot. Giddy is a non-custodial crypto wallet, and that kind of DeFi, or decentralized finance platform, is exactly what panicked crypto investors are seeking these days. They’re fleeing the unregulated centralized trading firms that put money and control into the hands of one entity—making it difficult to retrieve investments in the case of fraud or collapse—à la FTX.
Conversely, with DeFi platforms, a person’s digital dollars and data don’t reside in the hands of one company but instead are locked into smart contracts run by open-source code. The idea is that a single entity can’t drain funds or halt withdrawals. Investors are now touting a DeFi crypto future: DeFi platform Uniswap, for instance, outpaced Coinbase and Ethereum transactions in the days and weeks following FTX’s collapse. Famed venture capitalist Tim Draper recently took to Twitter to tout DeFi as the future for crypto: “FTX was centralized around one person,” he wrote. “Decentralized currency is the great opportunity for economic evolution.”
But DeFi platforms can be difficult to use correctly and require some effort to learn. In the past, non-custodial wallets needed seed phrases of 24 random words to restore your account. If you lost those words, you wouldn’t be able to restore your account, and the funds would be lost forever. And if someone else ever saw those words, they’d be able to access your account and transfer funds away.
Parker says Giddy aimed to simplify that process and open DeFi to the average consumer. Instead of requiring a seed phrase, which is a single point of failure, Giddy splits the private key across multiple control points such as a hardware device, your password, and a social account that you own.
“So if one is compromised, say by losing your phone, you can still recover your account as long as you have the others,” Parker says. An attacker would have to defeat multiple points before accessing an account, he says, compared to a basic seed phrase.
Giddy was also designed to be user-friendly, much like a banking app or using Venmo. In exchange for using the platform, Giddy takes a fee as an investor’s crypto money grows. The company’s app is still in early beta but already has 100,000 people on a waitlist to try the new platform.
The 2022 crypto market, however, wasn’t so kind to others in Utah. A smattering of tech executives lost money in crypto investments, including Scott Paul, an outspoken crypto advocate who has invested in 45 startups.
“I am $10 million poorer than last year,” Paul says. And he says he’s not the only one: “I know some people who lost money and haven’t even told their wives.”
Venture capitalists nationwide pressed pause on the frenzy of crypto deals. Many Utah crypto startups quietly shut down and their founders got day jobs, Paul says. Some, including TaxBit, laid off workers while others like HighTop cut back and pivoted their business models to favor decentralized crypto.
