The ONE thing that will save crypto

The ONE thing that will save crypto

Photo by fabio on Unsplash Many things to be improved in crypto right now

For those of you who have read any of my stories about crypto, you may be very aware that I am not particularly ultra bullish on the space (although I am personally invested and will continue to be), for many reasons: Technology maturity The technology isn’t mature enough for proper use cases besides being a distributed ledger, because it still doesn’t scale without compromising decentralization or security (which is an absolute no-no), also known as the blockchain trilemma. Many projects claim to have solved this issue, but there isn’t sufficient evidence still to prove it DeFi and smart contracts are screaming in dire need of regulation. With regards to the former, DeFi protocols hand both overcollateralized or unsecured loans to almost anything or anyone (no way to check the creditworthiness of crypto users as of right now). Many of these people eventually of course defaulted on their loans or get liquidated, an event that, added to other factors, drains liquidity and creates insolvency issues on the protocols. This, in turn, forces these protocols to halt withdrawals for ordinary people that do invest or borrow money in a sensible way. Wasn’t DeFi about freedom and eliminating intermediaries? Talking about hypocrisy — to be fair, most of these protocols aren’t truly decentralized, but they being marketed as such takes a toll on trust towards the space. —

As for the latter, situations like the Solend whale account take over generate just too much risk for anyone with modest savings to try to invest in DeFi. Correct regulation of smart contracts could prevent these protocols from rewriting their code and changing the rules of the game. Again, another straight blow to the face of financial freedom.

All this increase in risk has forced many of the protocols offering high-interest yields for lending money to drop their rates considerably, with examples like Compound protocol. With high “guaranteed” interest returns off the table, what’s the point of investing in such a risky environment? The most popular NFT projects have zero utility Of course, I couldn’t forget about the NFT bubble. NFTs show great promise, but this has been overridden by rampant speculation that has turned the space into a much bigger market than it should be in the first place. NFTs skyrocketed for two reasons. The bubble caused many retail investors and, of course, funds to enter the space for supposedly easy money, causing crazy high prices for jpeg photos that my little cousin could have easily drawn. Unsurprisingly, many of these people, that weren’t here for the tech but for the speculation, were eventually burned when the bubble popped. For instance, the price of BAYC NFTs, the most popular NFTs in the whole space, has slumped over 33% between April and June. However, it’s undeniable that NFTs have great potential. To understand their potential, I think it is necessary to explain what is an NFT.

An NFT is a digital asset which the particularity that its metadata is stored in a blockchain. Consequently, the true value of these digital assets is that being allocated in a blockchain gives them proof-of-provenance and, more importantly, proof-of-ownership . With regards to proof-of-provenance, blockchain publicly proves who issued that NFT, which is very relevant when it comes to digital art. On the other hand, proof-of-ownership is an uber-important concept in the world of non-fungible tokens. It ensures that the owner of a particular NFT can be verified and that the token cannot be transferred to someone else without permission. This verification is done through a blockchain, which creates an immutable record of all transactions.

All of this is great by itself for use cases like digital art, but it is totally insufficient to justify the prices some investors were paying for them. NFTs have great potential but they need utility to make sure they gain enough traction to become an actual valuable feature of the blockchain industry as a whole. Soul-bound Tokens (SBTs) could be the real start of the crypto era

A few months back, in May, Vitalik Buterin, founder of Ethereum, Puja Ohlhaver, and E. Glen Weyl published a paper titled ‘Decentralized Society: Finding Web3’s soul’. Last week, during the ETHNewYork Hackathon, the first position in the overall ranking was for projects related to this new concept known as soul-bound tokens .

This caught my attention, so I decided to read the 37-page paper the aforementioned researchers published. This paper is fairly complex, so I’ve decided […]

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