Most of the high profile collapses in 2022 – FTX, Celsius, Voyager, Three Arrows Capital, Genesis – involved custody-holding CeFi (centralized finance) companies that put customer funds at risk. That has galvanized supporters of DeFi (decentralized finance), who rightly note that the most robust decentralized market-making and exchange systems survived, precisely because they lack a trusted intermediary capable of such abuse. Yet as of October, Chainalysis estimated that DeFi investors had lost a record $3 billion year-to-date, due to smart contract breaches, “rug pulls” by founders, and because the underlying tokenomics of some protocols were deeply flawed. (The destructive collapse in the Terra ecosystem was exemplary of the latter instance.) DeFi is a wild, volatile, confusing, unpredictable place. To achieve widespread participation, it needs a more comprehensive audit model in which trustworthy independent analysts or bounty-hunting developers assess projects’ code security, founder practices and tokenomics.
Related posts
-
Latam Insights: El Salvador’s IMF Bitcoin-Braking Deal and Argentina’s Cyberspace Crypto Patrol
Welcome to Latam Insights, a compendium of the most relevant crypto and economic news from Latin... -
Binance Founder CZ Warns: Receiving Crypto This Way Could Instantly Empty Your Wallet
Crypto owners risk losing everything by accepting assets via... -
‘$600M Would Buy a Lot of Bitcoin’: Microstrategy Boss Steers Bezos Wedding Drama Toward Crypto
Michael Saylor, co-founder and executive chairman of Microstrategy, brought bitcoin into the spotlight during an online...