“Blockchain is a technology looking for a problem.” It’s a criticism every crypto enthusiast has heard from friends who haven’t yet taken the red pill, and while scathing, it sometimes almost seems true.
Blockchain will transform economies in almost every regard. But too many blockchain companies operate as though they don’t actually believe that. Instead of building a product with an actual product-market fit, such companies prioritize capitalizing on the latest round of hype and pumping their token. This short-term thinking damages more than just the industry’s reputation.
The push to announce a launch to the community at an earlier date or overpromise on a particular update creates problems that actually run as deep as the product’s code itself.
Inexperienced developers often don’t understand the extra steps needed in testing blockchain apps—especially when they are working to meet an unrealistically tight deadline arbitrated by hype. The global shortage of software developers and engineers exacerbates this challenge, resulting in bugs delaying the launches of products—and in some instances major hacks.
This is precisely what happened in the case of MonoX Finance, a decentralized protocol allowing users to trade digital assets with fewer requirements than a regular exchange platform. An accounting error was unintentionally built into MonoX’s smart contract, which hackers easily exploited.
By using the same tokenIn as the tokenOut (methods of exchanging the value of one token for another), the hackers were able to greatly inflate the price of the native MONO token when the updating tokenOut overwrote the price update in the tokenIn. The result was a loss of $31 million in tokens from both the Ethereum and Polygon blockchains. Of course, there is no logical reason for the software to permit transactions exchanging the same tokens.
Consumed by the hype
The crypto industry’s development hysteria stems from the lack of regulation and the overreliance on retail investors to raise funds in advance with the promise that “mass adoption” will make them rich. Every new dApp and P2E game claims to be the thing that will spark mass adoption – as long as you buy the ointment or the token. It’s a modern-day “cure all” and these guys are just the latest in a long line of snake oil salesmen.
Many industry marketing teams use a sales technique called “the presumptive close.” It’s an argument bitcoin maximalists make for astronomical forecasts of bitcoin, assuming the first digital currency one day surpasses gold’s market cap or becomes the world’s reserve currency (which, yes, it very well might).
Countless crypto startups make the same kinds of statements to win over inexperienced retail investors looking to replicate the success of early bitcoin investors, saying things like “four billion people use online payments, and if we catch just 10 percent of the market, we will become huge.”
These types of projects often attract and resonate with retail investors keen on finding a high-risk, high-reward investment. The built-up hype rushes developers through the development phases in order to meet deadlines and appease investors by showing progress. This rush to launch an app or token prematurely compounds the bug problem. This deadly combination creates a cycle where projects need to keep feeding the hype to survive.
When these projects inevitably fail to meet their overly ambitious expectations, retail investors end up losing because the project wasn’t grounded in reality. Venture capitalists can invest in 50 projects with the expectation that 45 will fail, but they will ultimately still turn a profit thanks to the successful five. Retail investors don’t have this luxury. Therefore, it is paramount that retail investors, who don’t have the background to fully vet all crypto projects, receive realistic and honest assessments and descriptions of a project’s business model and tokenomics. More transparency is always better—this will attract more retail investment than promising “huge returns.”
It’s usually not genuine ill will but inexperience, lack of business leadership, and pressure to deliver quick gains leaving retail investors feeling like chumps.
The problem with blockchain is not with the technology itself, but rather with the opportunism of certain companies in the industry. Only through due diligence and a more realistic approach during the development process can the industry accelerate its maturation process and show the true nature of blockchain and the benefits of a decentralized internet.
When that happens, we can talk about blockchain being “a solution looking for a problem.”
The post Op-Ed: Overhyping crypto tarnishes more than the industry’s reputation appeared first on CryptoSlate.
