Since the Bitcoin genesis of 2010, the promise of decentralization has been the greatest attraction for the cryptocurrency ecosystem. More and more projects have come to fruition promising to replace traditional services in today’s economy, and everyone seems to jump on board once these protocols begin to show positive price action. Astronomical gains have only increased the ambivalence surrounding the blockchain space because with impressive gains comes catastrophic losses.
The current market conditions have been nothing short of merciless given the long-term price action of assets across the board. Brian Newar of Cointelegraph reported that 72 out of the top 100 cryptocurrencies have dipped more than 90% from their all-time highs. Amid all this downward pressure, investors continue to lose money and are now calling on the judicial branch for help.
Everyone Wins in a Bull Market
The bull market of 2020 lasted for nearly two years, and tokens were experiencing double-digit gains daily. At the same time, stimulus packages were being distributed throughout the US as we were entering a pandemic. An abundance of capital began flooding our economy, and individuals along with institutions began overleveraging themselves (which we are starting to see the result of in this current recession).
FOMO was the theme of the new decade and very little research was being done into these blockchain projects showing positive price action. In the end, the assets that survive are those with real sustainability and utility, but everyone was making money, so it was irrelevant at the time. In the current bear market however sentiment has changed, and everyone is exiting positions as prices continue to plummet. Who’s affected by all the liquidating? The naïve and unaware.
Bear Market Territory
Bear markets bring to light those who are overleveraged and underprepared. Just a few months into this bearish cycle and so far, we have seen companies lay off employees, exchanges disclose control over their users’ private keys, and hedge funds declare bankruptcy. The crypto space has always been rather lawless, and once shit hits the fan, it’s every man for themselves. Liquidity issues are being reported left and right, and these establishments are only worried about saving their own asses.
In an ecosystem of alleged decentralization, Coinbase recently released a disclosure statement expressing that in the event of a bankruptcy filing, custodial assets could potentially be classified as company assets, stripping ownership from their customer base. Users on custodial exchanges have no true control over their tokens, and only in dire situations will this unfortunate truth come to light.
Centralized Decentralization
Something similar took place on Solana’s blockchain when a high-net-worth account holder known as a whale attempted to liquidate their position on one of Solana’s lending platforms. This account held a large number of the protocol’s tokens, and selling that position would have resulted in a downward spiral for Solana’s native token SOL. A governance proposal suggested taking control of the account to liquidate the funds more efficiently but was overturned after major scrutiny from Solana’s community.
The proposal served as a point proving that the Solana blockchain was capable of seizing assets that users believed to have full control over. He who holds the keys retains full control over an account’s tokens. Desperate times call for desperate measures, and when push comes to shove, it’s them over you.
Running for the Centralized Hills
In other news, Solana is also facing a class action lawsuit claiming that it is an unregistered security that only benefits insiders at the expense of retail traders. The defendant reported instances of misleading information and selling unregistered security tokens in March of 2020. Reports also show that as of May 2021, insiders hold over 45% of SOL’s total token supply, making it a centralized protocol.
Now let us take note that no one made a single complaint about this back in 2020 when Solana was beginning to increase in value. Only now when everyone is losing money do we want to run to the government pointing fingers and playing the victim. A decentralized ecosystem takes 3rd party help out of the equation; you must sustain yourself. From doing your diligent research and cashing profits when necessary, taking these matters to court when things don’t go your way defeats one of the main purposes of the blockchain space.
Bottom Line
Participating in a decentralized community involves looking out for yourself. Knowing what you are getting yourself into is the best way to stay protected in this unpredictable sphere of digital currencies.