The past two weeks have been a roller coaster ride for cryptocurrency, and much of the chaos can be attributed to a single individual.
Sam Bankman Fried is a controversial figure. Love him or hate him, he’s been the hottest topic in the news lately. But whether he is a scammer or bad money manager is beside the point.
Despite the scale of the FTX fiasco, it is only a small part of a much larger problem.
what’s the problem?
Read: FTX Victims Set Up GoFundMe Fundraisers To Try To Get Their Money Back: ‘$10,000 Is Absolutely Gone’
This is a widespread problem that every current and potential crypto investor should be aware of: there is an astoundingly low level of understanding of what cryptocurrencies are and how they are used.
This ignorance is growing in leaps and bounds, fueled by media headlines touting “institutional adoption” that will somehow knock in the golden age of cryptocurrency.
What it did is turn cryptocurrency into another asset that the traditional finance overlords destroyed.
The true purpose of cryptocurrencies is not speculation and institutional adoption. Its goal is to remove the middleman so that the entire system can remain decentralized, enabling transactions to flow freely and securely between empowered individuals.
No entity is supposed to control the system, and individuals should have complete control over their funds.
In its early days, cryptocurrency grew and thrived precisely because users understood one key concept: if you don’t own your keys, you don’t own your crypto. It used to be that you would keep a cryptocurrency portfolio instead of entrusting your money to the stock exchange.
But this success attracted centralized entities that saw an opportunity in the crypto space, and began opening centralized lending and borrowing institutions. They took advantage of users who are more accustomed to trusted TradFi (traditional finance, as opposed to DeFi, or decentralized finance) platforms such as Robinhood Markets HOOD,
And copy their interface for a more user-friendly experience.
But it’s not worth giving up your financial freedom for a little relief. The cost of depositing and storing your assets on these centralized platforms is sharing your private keys with them. Once you hand over your keys, it is possible for these institutions to manipulate your money however they like, and that includes locking up your money.
Centralized exchanges like these put investors back to square one by forcing them to give up control of their assets and reintroduce the broker.
This brings us back to where we are now – inside the hole that is an FTX disaster. The big problem with FTX, once the third largest crypto platform in the world, is that it was supposed to hold and protect your assets. Instead, the company loaned them out to an affiliate hedge fund for business purposes.
With FTX on every news channel, some choose to present cryptocurrencies as scapegoats. They fail to see the big picture and blame cryptocurrencies for running away with their money, when centralized crypto exchanges (CEXs) are the real culprits.
According to them, the problem will be solved by regulating all exchanges and possibly banning the use of decentralized finance altogether.
But the problem with regulation is that this could add more layers of TradFi to the mix, turning crypto into another central bank digital currency under the full control of the government and central banks.
This amazing cryptocurrency vs TradFi “Empire Strikes Back” saga will not end until every user adopts the crypto mindset. In order to achieve the level of financial independence that crypto can provide, users need to educate themselves on how to use this platform properly.
With that being said, the FTX plight remains a stark reminder of something we already knew: centralization is the real enemy of cryptocurrency.
But he is not an enemy who is winning yet. Although the broader market appears to be in a shambles at the moment, the cryptocurrency is still intact. DeFi kept things running while centralized platforms struggled.
DeFi still offers the allure of financial independence, decentralization, and transparency, while TradFi continues to show its weaknesses. And DeFi is still growing and developing every day.
Those of us who understand the huge potential of cryptocurrency will remain loyal, optimistic, and unwavering, following the principles of DeFi in our financial lives.
What do you think about FTX and cryptocurrency? Let me know in the comment section below.