• The collapse of FTX, Voyager, Celsius and BlockFi last year was not caused by blockchain technology but instead by criminal activity, poor risk management, novice business processes and malicious acts.
• Legacy media has mistakenly accused crypto as a scam following the failure of TradFi banks such as Silvergate and Silicon Valley Bank.
• Blockchain technology can actually prevent many of these issues from occurring in the future by providing an immutable record that is more secure than legacy financial structures.
Legacy Media’s Misconceptions on Crypto
Legacy media quickly reverted to tired and misguided accusations that all of crypto is a scam following the collapse of FTX, Voyager, Celsius, and BlockFi last year. Yet, none of the issues these failed companies faced were caused by blockchain. Instead, criminal activity, greed, poor risk management, novice business processes, hubris, and malicious acts were to blame – all of which occurred off-chain. I mean, the ‚Bitcoin is dead‘ mantra even came back with widespread media declaring the top cryptocurrency ‚dead‘ 27 times in 2022 – down roughly 50% from the year before.
TradFi Banks Insolvency Impacting Crypto
Now two TradFi banks are insolvent to the point of collapse – Silvergate and Silicon Valley Bank – and the contagion to the crypto industry is being felt most in the depeg of Circle’s USDC with billions of dollars deposited in Silicon Valley Bank. Again none of these factors negatively affecting crypto are due to on-chain failures but rather due to issues within legacy financial industry which are only impacting crypto due to governmental resistance towards DLT such as blockchain technology.
DeFi Working Where TradFI Failed
When FTX collapsed DeFi loans connected to it operated as intended while liquidations occurred without impacting underlying DeFi protocols themselves thus highlighting how DeFI worked where TradFI failed. Similarly when Tether had bank runs it survived while operating without fault with its supply being validated time and time again despite investors doubting Tether’s reserves.
Blockchain Technology Can Fix Issues
Blockchain fixes many problems seen throughout legacy financial markets however one issue is clear when looking at FTX’s failure showing how off-chain centralized exchanges were negatively effecting while DeFi loans connected worked correctly proving DeFI’s strength over traditional systems . Thus it is clear that blockchain technology can resolve many issues seen today within traditional finance making them obsolete in comparison to distributed ledger technology solutions .
In conclusion it is clear that although legacy financial markets have hit crypto industry harder than any other sector this does not occur because on-chain failures instead this happens because governmental resistance towards DLT such as blockchain technology meaning if implemented properly these issues should be resolved without further detriment towards those invested or handling digital assets .