Opinion | How Bitcoin is being ruined by scammy crypto scandals like FTX-EnglishHindiBlogs-News

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At the end of 2008, graduation took place Bitcoin white paper introduced the world to cryptocurrency. Over the past years, a whole industry has emerged, colloquially called crypto. In this industry, people are constantly creating what they believe is the next, better version of Bitcoin. A number of companies have also been created that serve as cryptocurrency exchanges where people can buy and sell cryptocurrency, giving customers access to these assets and protocols.

Much of the crypto industry has deviated from the principles that were crucial to the development of Bitcoin itself.

Bitcoin was a true technological innovation. But much of the crypto industry has deviated from the principles that were crucial to the development of Bitcoin itself. As evidenced by the stunning collapse of cryptocurrency exchange FTX, the crypto industry is overcrowded fraud, Ponzi schemes and bad actors. As a result, it is becoming increasingly clear that Bitcoin should be understood as something outside of the crypto industry.

The creation of Bitcoin was not an accidental discovery, but rather the result of decades of discussion and development by a group of people known as cypherpunks. It was an eclectic group of people concerned about privacy in the digital age and how the digital world required ledgers to keep an electronic record of transactions.

Cryptobanks wanted an alternative: a private type of money. In thinking about how to create this type of money, cypherpunks studied commodity money and free banking. Along the way, there were several attempts to bring this idea to life, but they either never got off the ground or ultimately failed.

In order to implement money with the characteristics that the cypherpunks wanted, something that would be resistant to censorship would be needed. The creation of a new form of money also has to deal with the incentives of the issuer, since someone who can issue their own money can potentially manipulate the supply to benefit themselves at the expense of others.

Bitcoin solved both of these problems. Anyone can download Bitcoin software and run a node on the network. The decentralized network maintains a digital ledger called a blockchain that keeps track of the balances of the cryptocurrency known as Bitcoin.

To solve the issue of issuer trust, Bitcoin software is programmed to have a fixed supply of Bitcoins. People don’t have to trust the issuer to be honest. Thus, Bitcoin solved the issue of trust in the issuer by removing trust in the system.

These new projects don’t aim to solve the practical problems that motivated the cypherpunks, but actually see blockchain as just another thing for the tech industry to tinker with.

Whatever one may think of Bitcoin, it is clear that it was a significant innovation motivated by a practical problem. It was important not only as a technical matter or a curiosity of economic theory, but also as an important technology Cuba, Afghanistan, Palestinian Territories and Africa — areas where mismanagement and corruption have affected major financial systems.

However, today’s crypto industry does not necessarily share the same vision that led to the creation of Bitcoin. These new projects don’t aim to solve the practical problems that motivated the cypherpunks, but actually see blockchain as just another thing for the tech industry to tinker with.

While these alternatives often provide additional “features” not found in Bitcoin, they do so at the expense of principles such as decentralization and censorship resistance that are central to Bitcoin. The most obvious of these is the second largest blockchain known as Ethereum, which allows people to write computer programs on the blockchain. Shortly after it was developed, someone found a flaw in one of these programs and used the flaw to transfer other people’s Ether (the Ethereum cryptocurrency) to themselves. The Ethereum developers responded by creating an alternative version of the blockchain that worked as if the hack never happened. So about decentralization.

It is more than a simple difference of vision. Crypto has created an entire industry of get-rich-quick schemes. Since 2017, this has manifested itself in the form of Initial Coin Offerings (ICOs). Various projects have emerged to develop applications that could be written on the Ethereum blockchain. Each project created its own digital token that it sold to raise funding for the project. If successful, people who bought the token would be able to use it for the project (although it often had questionable uses) or sell the token for a profit when the project is successful. Most of them projects there were failures or fraud and the Securities and Exchange Commission followed many of them. The process became so blatant that someone mockingly created something called it Useless Ethereum Token. While the SEC’s crackdown has curtailed some of this fraudulent, self-serving behavior, allegations remain that venture capitalists still exploit novice investors.

Opinion | How Bitcoin is being ruined by scammy crypto scandals like FTX-EnglishHindiBlogs-News - EnglishHindiBlogs

Last year, the intrigue only got worse. The first domino to fall was a project called TerraUSD launched on the Terra network. TerraUSD was allegedly designed as a stablecoin or token that trades one-to-one for the US dollar. The creators came up with a convoluted scheme to trade TerraUSD with another cryptocurrency to ensure that the price of 1 TerraUSD is always equal to $1. As you can imagine, exchanging one worthless asset for another not a sustainable strategy

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Nevertheless, the project became very popular thanks to a promise that investors could earn a 20% interest rate on their assets. This promise was nothing but a Ponzi scheme. Current value TerraUSD costs only penniesmeaning that anyone who continued to hold it lost almost all of their money.

As if that wasn’t enough, last week one of the largest crypto exchanges in the world went bankrupt. Led by quirky media darling Sam Bankman-Fried, the FTX crypto exchange has experienced rapid growth since its inception in 2019. With an unprecedented marketing campaign that included NBA arena naming rights and Super Bowl advertising, Bankman-Fried and FTX became major players in the crypto space. FTX offered people a way to deposit money and buy and sell cryptocurrency. It also allowed more advanced traders to speculate using more exotic trading strategies. Bankman-Fried also considered himself a politician, testimony to Congress regarding cryptocurrency regulation.

Now it appears that the company may also have been fraudulently using customer funds to speculate for its own profit. The Wall Street Journal and CNBC, citing anonymous sources, reported that the hedge fund owned and founded by Bankman-Fried, known as Alameda Research, received billions of dollars in client funds for use in trading. According to CNBC, all this was done without the knowledge of FTX customers. Billions of dollars of customers could simply disappear.

This story shows that what is commonly known as crypto is distinctly different from both the cypherpunk vision that inspired Bitcoin and the development of and around Bitcoin itself over the past decade. While Bitcoin was created to be a censorship-resistant, unreliable digital form of money, cryptocurrency has become a space dominated by get-rich-quick schemes. Whatever this crypto industry is, most bitcoins and bitcoiners don’t want to take it.