Yes, Crypto Collapses Again Blockchain Continues

The cryptocurrency market this week fell for the second time in a month, coupled with a sharp decline in global stock markets. This kind of collapse is not the first time, but once again demonstrates just how much the violent volatility of rarely regulated markets can distort the development of innovative technologies. However, encryption is only one aspect of the larger blockchain world. Skeptics and admirers alike must learn to see it as an experiment in technology, not as a speculative route to outright fraud or luck.

Why did the market collapse in such a surprising way?

The first recent crash in which the cryptocurrency market plunged 36% in the week of May provides evidence of that. The crash was caused primarily by the death spiral of a cryptocurrency system called Terra Luna, which consisted of Luna and its associated stablecoin, TerraUSD. It took nearly 3% of the total cryptocurrency market at its astonishing spring highs. Fear spread across the exchange, followed by panic selling.

After the second crash this week, the cryptocurrency market is still worth nearly $1 trillion (about a third of last November’s high). Of the 19,000 cryptocurrencies created since 2009, only a handful are currently worth billions of dollars. Most of them have failed. Cryptocurrency markets are highly volatile, not because of the underlying technology of cryptocurrencies, but because of the volatile and often volatile intersection of emerging technologies and fiat currencies. In the long run of market history, this instability is nothing new.

In the late 1990s and early 2000s, internet stocks, like today’s cryptocurrency space, were a turning point. Even back then, bullying was rampant, the atmosphere was like a casino, and almost every idea with a ‘, no matter how reckless or stupid, caught the attention of investors and the press. It seemed as though huge fortunes were being made and lost every day.

But even when Napster, Webfan, and e-Toys caught fire, a revolution was taking place. Despite all the casino scams, real and lasting online businesses, publications and communities have been built and thrived. The Internet has survived to some extent.

Terraform Labs, the company behind TerraUSD and Luna, was founded in 2018 by South Korean computer scientist and entrepreneur Kwon Do. Now 30, Kwon is an infamous brazen con artist who has caused a stir by calling his critics “poor” and “roach”. But despite the lack of improvements and early warnings from developers and analysts about the technical weaknesses of his plans, he raised $200 million in venture capital between 2018 and 2021. His company aims to achieve a difficult-to-achieve cryptocurrency goal: a truly stable currency ‘decentralization’.

Acting as a kind of bridge between cryptocurrency and fiat money, Stablecoins required huge amounts of traditional real-world collateral to operate, contrary to the cryptocurrency’s original goal of eliminating dependence on the traditional financial system. Terra Luna was a stablecoin algorithm system whose “stability” had to be guaranteed by mathematical mechanisms and incentives. Like stocks that surged in online stocks, these stocks have been shown to be at risk when confidence wanes.

In the 2000s, chemists involved in CDO turned junk securities into AAA gold through a mathematical magic called “pooling”. The mystical mathematics that underpins algorithmic stablecoin systems like Terra Luna provides the same enchanting mystical atmosphere. However, as more and more borrowers defaulted, collateralized debt and other unusual derivatives that Warren Buffett once called “weapons of mass destruction” collapsed, contributing to the 2008 global financial crisis. The destructive power of derivatives can be heard in: An equally bizarre story of Terra Luna.

Such risks can last for a long time. The sad thing is that when danger suddenly appears, it takes people’s real money and often great and promising projects. Or the entire economy: Losses from the 2008 crash were estimated at over $10 trillion in the United States alone. This is an amount that dwarfs the most disruptive volatility of cryptocurrencies to date.

As Terra Luna’s death vortex accelerated, proponents known as “Lunatics” stumbled between fear and hope as Kwon shoveled more than $1 billion of bitcoin into the system to restore stability. “Spread more capital – steady boys,” he wrote on Twitter.

However, in the end, it was not enough to fill the flow of cash like a regular bank, and this special experiment to replace confidence in mathematics came to an end. Among thousands of failed crypto attempts, Terra Luna stands out as one of the largest, with a total market capitalization of nearly $60 billion.

Big opponents of crypto have rushed to celebrate the death of blockchain, claiming that all cryptocurrencies are scams. These critics are mirror images of equally unrealistic fans on the other side of the spectrum. I am a crypto-liberal, demanding a financial world that is completely free from regulation.

Responsible players in the cryptocurrency market have been demanding and supporting the development of rational regulatory frameworks for many years. The basis for cryptographic regulations already exists. In the United States, federal agencies, including the Financial Crimes Enforcement Network, the Securities and Exchange Commission, and the Commodity Futures Trading Commission, are considering separating trade and taxation starting in 2013. started doing Cryptocurrency Enforcement Team. . The list of crypto scammers imprisoned in prison already surpassed the number of bankers imprisoned in the United States for their role in the 2008 financial crisis.

In the early days of the Internet, the circus atmosphere made it easy to ignore risks such as surveillance capitalism and illegal government snooping, which could have dire consequences for the world. This has resulted in privacy frameworks such as the Gramm-Leach-Bliley Act of 1999 in the United States and GDPR 2016 in Europe, and language protection regulations such as Section 230 of the Communications Decency Act. .

At the same time, the masterpieces of the Internet have multiplied, and now it seems like inconspicuous magic. Simultaneous translation of almost any language; Search service for each field of knowledge; Almost instant world news. Today’s Internet is deeply intertwined, for better or worse, in the world’s economy, media, politics, industry and social life.

There are similar advances in the crypto business. Blockchain, the technology that enables cryptocurrencies, has as transformative potential as the internet innovations we rely on every day, and industries such as supply chain management, finance and pharmaceuticals are already beginning to use them.

It is possible to imagine a future where you can find out the fate of every tax you have paid and government corruption is almost impossible. Where beautiful and important stories, music, games and art do not disappear from the Internet; You can transfer surplus solar power to and from your neighbors without having to rely on big power companies, and there will be no outages. Wherever independent, tamper-resistant record keeping is required, blockchain can make all receipts usable and secure for anyone to see.

However, to create a world like this, cryptocurrencies must be responsibly integrated into the current global economy. Regulators, the media and market participants must take the same stand to balance the benefits of innovation with the need to avoid harm, and must be severely rebuked rather than fostered naked greed.

For many, the prospect of huge gains is the most exciting thing about cryptocurrencies. It is a gold rush where anyone can go beyond their dreams and suddenly become rich. But the unfortunate quick-witted mindset that has long been associated with entrepreneurship, cryptocurrencies, etc., must go away.

After all, just like everyone else continues to work whether the stock market goes up or down, the real work on developing blockchain technology will continue regardless of market play.

Maria Bustilos (mariabustilos) is the founding editor of Brick House Cooperative, a journalist-owned publishing platform, and Popula Magazine, an alternative news and culture magazine. She has been using blockchain technology to build her press platform since 2013.

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