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Wait, wasn’t bitcoin supposed to solve this?

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Jill Gunter is the co-founder of a blockchain company espresso systemPreviously, she was a crypto-focused venture capitalist. She started her career as a trader at Goldman Sachs.

A common saying among cryptocurrency proponents over the years is that Bitcoin will solve this. However, the same phrase has also become a popular meme among cryptocurrency and blockchain critics.

Skeptics offer this phrase in response to overly enthusiastic cryptocurrency enthusiasts looking to apply blockchain technology to everything. History of salad To Social media“Bitcoin solves this,” they roll their eyes, gesturing to the fact that the amount of blockchain will not be a panacea for the problem at hand.

like last week, Crypto exchange FTX Cryptocurrency proponents and critics alike have been forced into bankruptcy as embezzlement of customer funds, fictitious marks and risky bets are exposed. “Wait a minute, wasn’t bitcoin supposed to solve this?”

After all, cryptocurrency was invented Expressly To combat Wall Street’s opaque and excessive leverage.original Bitcoin whitepaper He proposed a system that would end reliance on trusted financial institutions, reduce fraud and protect consumers. Nothing could be more ironic at this point.

But the promise of not having to trust anyone is a tantalizing promise! According to Gallup, trust in governments, media, banks, etc. is stable. rejected For decades, but really, all you need to do is log on to Twitter this week, check out the mess, and see that society has trust issues. No wonder blockchain, which it pledged to eliminate, has captured the imagination of so many.

To their credit, I think blockchain and its “decentralized finance” (DeFi) applications have indeed delivered on this promise. Individuals can store their own crypto assets, self-audit the ledger of transactions, and even participate as administrators and supervisors of the entire system. Millions of people just need to rely on the code.

These cryptocurrency users may have lost sleep this week as the value of their assets plummeted, but at least they will be able to access their funds again, much like a centralized cryptocurrency exchange like FTX. I wasn’t worried if I would.

While FTX customers have been unable to withdraw their funds in a hurry, users of leading decentralized financial instruments such as Uniswap, Compound and Aave have continued access to their assets and orderly controls for trading, trading and clearing. Benefited from transparent processing. For users who hold their own coins and only trade on decentralized financial platforms, cryptocurrency has arrived.the blockchain can Reduce the risk of intermediaries!

Unfortunately, not all cryptocurrency holders take advantage of these characteristics. Because there are big trade-offs.

For cryptocurrency users to reap the benefits of blockchain, they have to use new and cumbersome products with their own risks.If they make a mistake the stakes are high and they only have themselves to blame. Hundreds of millions of dollars of bitcoin thrown in the dumpster was “acting as his own bank”. As he showed for us, being his own bank has major drawbacks. No one to turn to and no customer support if you lose through your own fault.

DeFi users also take risks inherent in an anarchic utopia (or dystopia?) where the code is law. If the user mistypes the address to send the asset to, there is no way to undo it. Similarly, if a hacker finds a bug in the code of her DeFi product and withdraws user funds, the victim has little protection. It’s like the ultimate “finder’s keeper”.technology for these types of Hacking is happening all the timeFor many users, it is not worth the inconvenience or risk to get the benefits of an “untrusted” system like DeFi.

Users who don’t want or need to keep their crypto can do it the old-fashioned Wall Street way. In other words, you can trust your administrator. Custodian exchanges not only allow cryptocurrency users to cash out and withdraw coins and tokens, but also hold user assets as deposits.Of course, users who hold and trade exchanges are not really Use Cipher. They are not extracting the features cryptography were designed to provide, such as self-control, censorship resistance, and transparency. I’m just there.

Still, it’s safe to say that millions of users have benefited. comfortable Hold assets on these exchanges. Today, at least 1 million users, who used to use his FTX, would be better off if they had taken advantage of the value proposition of cryptocurrencies and kept their own funds. turned out to be

And the harsh reality is that as of today, the cryptocurrency market creates more intermediaries than it eliminates, even though Bitcoin and other blockchain products offer alternatives. In the last few years, no one cared about the real utility found in cryptocurrencies.

With the global influx of easy money into all kinds of asset classes pushing people further and further away from the risk spectrum, entrepreneurs, developers and investors are forced to make big bets rather than deliver lasting value. I realized that it was motivating me to participate in building a public bubble.

Much of the time, energy, money and attention spent on cryptocurrencies over the last few years has centered around magic beans rather than creating products that take advantage of the openness, transparency and autonomy that technology offers. has been spent on building a gambling market. .

FTX And betraying user trust serves as the clearest reminder the industry could demand as it reverts to its original vision. The demise of FTX feels like the end of cryptocurrencies at this point, but it could be the catalyst to propel the industry into areas where cryptocurrencies and blockchain can solve real-world problems.

Already, more custody exchanges have announced that they will take advantage of blockchain transparency to offer cryptocurrency to the public. “Certificate of Stockpile”This is a great example of leveraging technology for true utility in increasing accountability.

While we may feel optimistic in this time of shame and darkness, we hope that cryptocurrencies will actually enable a more open and transparent system, and that in 10 years time we can look back and say, “Bitcoin solved this.” can be expected to be

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