Crypto has come a long way since its inception, but the recent FTX collapse has forced soul searching. This post will discuss crypto’s most significant challenges today: personality cults, speculative bubbles, and the concept of progressive decentralization.
1. Personality Cults
The thing is, relying on personalities gives power to those personalities. Power corrupts, and absolute power corrupts absolutely. Each web3 project has a character at its center. Ethereum has Vitalik, Solana – Anatoly, Coinbase – Brian Armstrong, Binance – CZ so on and so forth. We need to trust code, not people. Some of the biggest scams in crypto have happened because a person had the power to do that. The fundamental premise of crypto is that we trust the code. Ironically, it’s the crypto where we see a lot of personality cults.
2. Speculative frenzies
This is the hard one. For a long time, I believed that speculation is a feature of crypto, not a bug. But I am changing my stance on this. At least temporarily, the speculation seems to hurt more retain investors than it’s helping. It tarnishes the reputation of the industry time and again.
Now, any investment has speculation at its center. You take a mortgage because you believe that the value of the house over time is going to be more than the cost of the mortgage etc. In crypto, however, it’s speculation on steroids. Retail investors would just buy tokens and plan to dump them in days/weeks purely because they believe that there is a pump going on. That happens in public markets as well via futures, and options but it’s way more regulated over there.
3. Progressive decentralization
If there is one lesson from the FTX fiasco, it would be that decentralization matters. All DeFi projects that have been completely decentralized (Uniswap, Aave, Compound, etc) have been working flawlessly.
However, the concept of progressive decentralization has become an excuse not to take the pains it takes to decentralize. We often see in crypto that a project will start with the goal of progressive decentralization. If you are not fully decentralized, you are centralized. There is nothing in between. The problem with partial decentralization is that someone can still change things which makes it centralized. Without this distinction, unsuspecting retail users are duped into thinking that a project is decentralized while it’s only partially decentralized.
These are some of the challenges facing crypto today, but if we can overcome them, crypto will be better. What do you think? Let me know in the comments below! Thanks for reading!
PS: This is my second Web3 post (first – Why Web3 is great innovation). As some of you might know, I am the founder and CEO of a Web3 company Helix. I have been living and breathing Web3 for the last seven months. You can follow me on Twitter to engage with me