No menu items!
More

    3 warning flags that signal a crypto project might be misleading investors

    Satoshi Nakamoto created a large set of footwear to fill after releasing the code for Bitcoin (BTC) around the world, assisting to establish the network, then disappearing without a lot like a trace. 

    Through the years, the crypto ecosystem has witnessed many developers and protocol creators increase in stature to get crypto messiahs for faithful holders who eventually get their best-laid plans finish in catastrophe once the protocol is hacked, rugged or abandoned by unique developers.

    2022 is hardly midway complete and also the year has seen an especially bad stretch of excellent intentions gone awry, that have with each other helped plunge the marketplace into bear-market territory. Here’s a closer inspection at all these instances to assist provide understanding of how similar outcomes could be prevented later on.

    Some developers are anonymous for any reason

    Satoshi might have effectively continued to be anonymous while launching Bitcoin, but more often than not since that time, getting anonymous developers has switched out to become a warning sign.

    Many anonymous developers cite personal safety causes of using this route. Although this is a legitimate reason in some instances, sometimes anon developers are avoiding previous misdoings or pre-intending to cover their tracks within the situation of future offenses.

    A flagrant illustration of it was Squid Game (SQUID), a Netflix-show-inspired memecoin that rallied 45,000% inside a couple of days after launch, just for traders to understand that they are not able to market the tokens on any exchange.

    Investors eventually learned that all of the developers were anonymous and all sorts of social networking channels were blocked from comments.

    The crypto community has grown to become rather distrustful of anonymous developers which is observed in the negative response to the thought the founding father of the Azuki nonfungible token (NFT) project was associated with three other NFT projects which were ultimately abandoned, departing their holders with little to exhibit except useless jpegs.

    Another demonstration of an anonymous developer going rogue happened in 2022 if this was says the anonymous Wonderland (TIME) treasury manager @0xSifu switched to be an alleged financial criminal, together with QuadrigaCX co-founder Michael Patryn.

    The thought of the connection led to the collapse of countless popular projects including Wonderland and Pop-sicle Finance, while a lot of critique was fond of Abracadabra.Money creator Daniele Sestagalli.

    Before the @0xSifu thought, the 3 protocols were seeing elevated adoption, but , each protocol is really a mere shadow of their former success.

    Getting anonymous developers removes accountability in the equation and it is more and more being a warning sign when confronted with multi-billion dollar cryptocurrency protocols.

    Watch out for cult personalities

    Finance isn’t any stranger to cult personalities and crypto isn’t safe from this phenomenon.

    Lengthy-time crypto pundits will recall Roger Ver being known as “Bitcoin Jesus” and hileading the charge to fork Bitcoin Core and create Bitcoin Cash (BCH). Millionaire Dan Larimer also one thinks of, and investors will recall his helping EOS (EOS) raise $4 billion throughout the initial gold coin offering (ICO) boom of 2017 to 2018. In every instance, it had been a fervent flock of supporters that propelled each project forward.

    Neither BCH nor EOS were able to reclaim their all-time highs throughout the 2021 bull market despite all of the hype regarding their future when first launched. This really is possibly because part of the hype is focused on the personalities behind the projects.

    A more modern example includes the collapse of Fantom ecosystem token prices after decentralized finance (DeFi) developer Andre Cronje deactivated his Twitter account and informed the city he was departing the crypto space entirely.

    Cronje became very popular that lots of people would purchase a token simply because he was involved, so when he left, a number of these investors dumped their holdings, which negatively affected the tokens’ prices.

    While Cronje was doing what he thought was right coupled with no ill intentions toward the city, his actions have the symptoms of negatively affected the crypto market because of his recognition inside the community and also the dedication of his supporters.

    The primary takeaway will be vigilant whenever a developer is viewed as not capable of doing wrong and don’t forget that cult-like followings might have outcomes that ripple beyond their community.

    Related: Court papers reveal Do Kwon dissolved Terraform Labs Korea days before LUNA crash

    Decentralization requires relating to the community

    Another warning sign to look for ar decentralized autonomous organizations (DAOs) and DeFi protocols that operate in a fashion that seems to become more centralized than their name indicate.

    It’s common for a lot of protocols to assert that they’re decentralized, yet they depend on centralized providers like Amazon . com Web Service to make sure that they function correctly.

    Another pertinent example happens when a task that states offer token holders governance legal rights constitutes a major protocol decision without talking to the city for feedback and approval.

    The move by Terra (LUNA) to include BTC to the treasury as collateral for that TerraUSD (UST) stablecoin made headlines and it was lauded by many people, however the move never was offer a election inside the Terra community to determine what token holders thought.

    While there’s a strong possibility that the program could have been approved and also the collapse of Terra still might have happened, the culprit may have fallen more about the city and fewer on Do Kwon, the project’s leader. It is also worth mentioning which do Kown acquired quite the popularity and it was frequently insulting a number of people on Twitter.

    Among the primary tenets from the cryptocurrency sector is adherence to decentralization and failure to do this frequently results in a compromised network and dissatisfied investors.

    Want more details about buying and selling and purchasing crypto markets?

    The views and opinions expressed listed here are exclusively individuals from the author and don’t always reflect the views of Cointelegraph.com. Every investment and buying and selling move involves risk, you need to conduct your personal research when making the decision.

    Latest stories

    You might also like...