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If you crash on track, run through the smoke!
You are unlikely to know that this is a quote from the 1990s American sports action movie Days of Thunder. Tom Cruise appeared in the driver’s seat. What do Nascar racing movies and modern crypto have in common? More than you think.
Nascar race cars aren’t all that different, but when it comes to performance, the details can make a big difference. All of our support teams are experts in their fields, but with a little more skill, a 1-nanosecond pit stop can yield a huge efficiency boost. Driver is undoubtedly the star of the show, but it is Driver’s leadership that really pulls the whole operation together to achieve fame and glory.
At Crypto, all the teams follow the same rules in the same industry, lap after lap, with the goal of reaching the finish line before anyone else. Many blockchains or applications are similar at a high level, but small changes and tweaks yield advantages, either in scalability, decentralization, or security. The developer works around the clock to tweak and fix critical bugs to gain market share from competing blockchains. And the founder or co-founder team is what drives the organization with an eye on the award.
Anyone who has watched a Nascar race knows that collisions happen all the time. And anyone around the block in our industry knows that a once-invincible project can suddenly and very dramatically fall apart. It is important to analyze and analyze what can be done to prevent a recurrence, or at least understand how to mitigate the damage.
Days of Thunder has had two major crashes with very different results. Approaching the crumpled and wrecked car, Team His Head instructs Tom Cruise to “run through the smoke”. The first time our hero does this, he ends up in the hospital. The second time leads to victory.
Crypto has also experienced two major crashes this year, starting with the Terra-Luna collapse in May and the ongoing FTX debacle. In the first crash, everyone was unprepared, inexperienced and terrified. Many companies have had near-death experiences, and some have not been able to walk through the smoke. Those who survived either cherished the lessons learned and worked to improve the game on every level, or continued with the same old routine, discounting the chances of another Black Swan event one after another.
Celsius then lost a tire. BlockFi was unable to steer. Others pile up. And eventually, SBF’s car rolled over, covering the track with a thick cloud of smoke.
We’re still running through the smoke and it’s getting darker with no end in sight. Who will clear the smoke and come out unscathed? Which car will come out with the slightest dent? And which one crashes and burns? We won’t know for sure until it’s over, but seeing how some companies responded to the initial Terra Luna demise, experience will You can make an educated guess.
what happens next
Centralized exchanges will struggle to move forward as they have made few substantive changes after the initial crash. Most of them performed as usual and used poor risk management and controls to lend their assets. The few centralized lending platforms that still exist are also going through difficult times. Because we didn’t take enough risk under the false assumption that a second Black Swan event wouldn’t follow soon.
Stronger players include blockchain projects that manage finances wisely, focus on development, and expand their runway without chasing short-term returns. Independent administrators who prioritize hardening their core infrastructure to provide safe harbor for all other players are also more likely to end up unscathed.
Amidst all the uncertainty, one thing is clear. A strong blockchain and custodian combination leads the competition. Where these two overlap is staking. True on-chain staking, supported by security that only a fully licensed and independent custodian can provide, allows the best projects and their dedicated communities to weather the tough times ahead and thrive when the smoke clears. It’s even possible.
Bitcoin and its proof-of-work model will always be the gold standard in this industry, but proof-of-stake blockchains are garnering more interest and faster It can thrive as fertile soil for business. Growing the developer community. The role of the independent custodian is to provide secure access to parties who wish to contribute to these blockchains through staking her solutions so that every staker has full control over their assets and private keys. .
The only way forward from this point is full transparency of on-chain transactions. If staking is done without providing the validator with the transaction ID of a successful on-chain delegation, it is not true staking, but should be considered a lending solution. And as an industry tries to learn from past mistakes, opaque mechanisms that do not verifiably prove where and how assets are deployed can quickly become ugly.
The only way to get through the smoke is on-chain.
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