The crypto paradox: Why the decentralized ideal has fallen into the dilemma of rampant evil

Author: Brook; Translator: Elaine & Sissi & Leia, TEAO

Introduction:

The chaos and lack of innovation in the crypto world make people wonder: Are we moving towards an ideal future in a substantive way? The preface of "Protocol Revolution and DigiLaw Engineering" explores the essence of the crypto world, the bottlenecks in development, and the infinite possibilities of future construction from a systematic perspective, providing important thinking for understanding the true face of this new planet.

This article is the fourth in the preface series, and more Chinese translations will be released in succession.

Crypto Paradox: Cannot do evil, but full of evil

Why is evil in the crypto world so rampant and persistent?

Although the crypto world has been developing for more than a decade, the problems of frequent chaos and disorder are still serious. It is often attributed to "the emergence of any emerging financial market will be accompanied by various problems." However, behind this explanation, there is a very contradictory point, which I call the "crypto paradox": the original intention of the crypto world was to build a new system from "Don't be evil" to "Can't be evil" with the help of blockchain technology and decentralized concepts, but now it has fallen into the absurd dilemma of "rampant evil". This makes people wonder whether there is any particularity in the evil deeds in the crypto world today?

Extreme speech is often easier to attract followers because it simplifies complexity and strengthens emotional identification, so that the voice of reason is quickly drowned out by the noise of the mob. In order to understand the problem of "crypto paradox" more deeply, we must gradually explore the serial reasons behind the dilemma.

Information barriers and information fog

When analyzing these reasons, it is not difficult to find that the cognitive tearing and blind obedience in behavior are derived from information barriers and information fog.

For bystanders, they don’t know that the crypto world is undergoing earth-shaking changes. They only hear a few dangerous messages about the crypto world from others from time to time. They refuse to accept all objective reports and use stereotypes to build a solid "information barrier" for themselves.

For participants in the crypto world, it is also not easy to obtain real and valuable information. Although the Internet has given everyone unprecedented information acquisition capabilities, it has also brought about problems of information fragmentation, duplication, and noise. Especially in the emerging field of encryption, various opinions and theories have sprung up, but there are few truly in-depth forward-looking thinking. In addition, a large amount of true and false information is mixed in the market, which further exacerbates the confusion of information. Senior crypto participants know that only one thousandth of the projects and information in the crypto world are valuable enough. Therefore, the vast majority of participants are trapped in the "information fog" and it is difficult to have a clear and comprehensive understanding of the crypto world, and they can only follow blindly.

Scams, speculation and open casinos

At the same time, this information barrier and information fog are further strengthened by the rampant scams and speculation. ‍‍

Some criminals in the crypto market seize the greed of participants and use information asymmetry to set up a large number of seemingly impeccable frauds and Ponzi schemes in the "open casino", leading a series of speculative dramas claiming to be "wealth freedom". They continue to release a large amount of "carefully packaged" distorted information into the market, step by step strengthening the information fog and facilitating the next evil. The crypto ecosystem seems to be caught in an unsolvable vicious cycle. It is worth noting that fraud and scams are pure evil and should not exist, but I do not want to deny speculation completely. As Matt Huang said, "The speculative craze for cryptocurrencies can attract settlers and accelerate the infrastructure needed to catalyze the evolution of the crypto planet into a prosperous crypto civilization." Speculation provides the crypto world with the funds, talents, infrastructure and academic research needed for development, which is similar to the situation in history where many major technological changes have been accompanied by asset bubbles. However, once driven by "greed" or because it is difficult to see the true face of the project and speculate in air projects and Ponzi schemes, although there is a certain probability of gaining profits, it often disrupts the market order, forces the industry to regress, and pushes the crypto world into a "hotbed of evil."

The dark side of token abuse in centralized projects

The rampant scams and speculation actually stem from the abuse of tokens in centralized projects.

Tokens are a double-edged sword. Only in decentralized projects can tokens better promote comprehensive value creation. However, many project parties regard the crypto world as a "decentralized theater." They wear the mask of "decentralization" but conduct highly centralized operations in private. Once the token is issued, it means that the crypto protocol and project involve the interests of the public, and there is a possibility of using information asymmetry to do evil, and it should be regulated like traditional stocks. But they claim that the project is "decentralized" and should not be regulated by the government, but by the community. However, the current community lacks sufficient technology and methods to achieve effective supervision. This "regulatory gap" has caused some centralized project parties to continuously use tokens to explore and expand the space for evil from the beginning, using decentralized stories to attract ignorant people or speculators, and stage scams and speculative dramas.

Technology and Mechanism: Double Challenges

Centralized projects issue tokens indiscriminately without supervision, which is the special root of "evil" in the crypto world.

The reason why this root exists involves at least two aspects: "technology" and "mechanism". From a technical perspective, the technology stack of the crypto world has not yet broken through the limitations of the "impossible triangle" and cannot create a cryptocurrency or blockchain system that is both secure, decentralized and scalable; from a mechanism perspective, on the one hand, the imperfection of the mechanism provides an opportunity for the evil of human nature, and on the other hand, the complexity of the current ecosystem makes our mechanism research and related talent reserves insufficient to support the construction of a "skyscraper". However, many projects claim to build "decentralized automated high-rises" for various purposes. But eight out of ten of them are centralized projects that were packaged and then built two floors and then ran away, one was due to structural instability or attack that led to the collapse of the building, and one was due to the failure of the automation system that led to the deserted building. Only the basic old-fashioned smart contract protocols (such as MakerDAO, AAVE, etc.) have been able to stand firmly in the market turmoil and go through rounds of bull and bear markets because of their decentralized value creation and simple but strong protocol mechanism. I am not a "decentralization"-only theory. Decentralization is a means, not an end. Without the premise of "decentralization" and inadequate supervision, tokens are prone to amplify the evils caused by "centralization", which is undoubtedly a major problem facing the crypto world.

To be continued...