Cryptocurrencies made a huge leap in 2021 and expanded far beyond the niche between nerds and Redditors. Wall Street has stepped up its acceptance, and Morgan Stanley CEO James Gorman has declared it unfashionable. Eric Adams, New York City Mayor-elect, said he would initially be paid in Bitcoin. And tokenmania has invaded pop culture, from sports, entertainment, games to high-end auctions. Even Major League Baseball referees had the FTX Exchange logo on their chests.
Still, the industry didn’t understand the basics correctly and suffered from the same problems that plagued it from the beginning: transaction glitches, infrastructure failures, hacks, and other cryptocurrencies.
When a digital token gets a small amount, it can be dismissed as a ridiculous sideshow. Cryptocurrencies are now worth real money — over US $ 2 trillion (RM8 trillion), assuming data errors don’t garble the aggregates — and their supporters are far more revolutionary than traditional finance. I want to wake up. Their ability to do so, and the persistence of cryptography, may depend on addressing and fixing basic plumbing and security issues, if possible.
“We use the Facebook model of” moving fast and breaking things, “” said Larry Tab, Head of Market Structure Research at Bloomberg Intelligence. “There is no regulatory impetus to solve these problems, so it’s a matter of competition. If you’re tired of one exchange, switch to another player.”
Cryptographic believers claim that obstacles are expected in the early industry. It will find that scaffold, they say. perhaps. Whatever the future, there was certainly a great deal of turmoil in 2021.
Just this month, CoinMarketCap, a reliable source of cryptocurrency prices, spewed out incredibly wrong data across the market. Bitcoin prices in excess of US $ 800 billion (3.3 trillion ringgit) are displayed on the website, and the value of all tokens in circulation is US $ 15 trillion (62 trillion ringgit), which is about 660,000 of the US gross domestic product. Equivalent to double.
The company, owned by the digital asset exchange Binance, usually responded with a wacky cryptocurrency. It was a tweet filled with glib and memes. “How did you feel when you were a trillion people for a couple of hours?” Read one and then the tears emoji. Some industry watchers were not very optimistic about their reaction.
The incident was blown away, and even players in the market affected by Gaffe seemed happy to forget to forgive. “Honestly, this is just one indication of an emerging industry,” Emilie Choi, president of Coinbase Global Inc, said in an interview at the Bloomberg Technology Summit on December 15.
The CoinMarketCap case didn’t seem to do much harm to anyone, but in other cases it wasn’t. Some mistakes have caused the decline in Bitcoin. This is exacerbated by the fact that automated security features such as circuit breakers on the US stock market are not common in cryptocurrencies. In October, trader Argo plunged, dropping the world’s largest cryptocurrency by about 87% and then recovering. In early December, Bitcoin was as small as 20%, but still experienced a disastrous plunge when traders oversold indiscriminately with few weekend deals. ..
Some turmoil has made it impossible for investors to trade at all. Both Coinbase and Binance stopped when Bitcoin fell more than 10% on May 19. Bitfinex fell on September 30th.
Then there was the moment when the blockchain infrastructure that strengthened cryptography raised the issue. Solana emerged as a competitor to Ethereum in 2021. Ethereum is effectively a global supercomputer that runs software called smart contracts. However, Solana broke down for 17 hours in September, ruining a small but growing corner of decentralized finance (DeFi).
Separately, a project built in Solana (Pyth), which counts Wall Street’s major traders as contributors, encountered a computer software bug in September and the service plunged 90% of Bitcoin’s price. I reported it incorrectly.
These are just a handful of many examples.
“These are problems that absolutely need to be resolved, but I think many of them have fairly simple solutions,” said FTX billionaire co-founder and CEO Sam Bankman-Fried this month. Bloomberg What goes up Podcast.
Other asset classes have also been involved in tech dramas for many years. For example, squirrels have been a recurring nightmare for stocks, causing power outages, disrupting the Nasdaq market in 1987 and again in 1994. The infamous 2010 flash crash cost the entire US stock market $ 1 trillion in minutes. Then, just as quickly, he recovered the terribly creepy Wall Street. A major Nasdaq pricing service broke in 2013, freezing stocks like Apple Inc for hours.
However, the stock market infrastructure has been pretty good since the New York Stock Exchange shut down for three and a half hours in 2015. This shows that the US Securities and Exchange Commission’s crackdown has increased the resilience of software for traders and exchanges.
Crypto means much less monitoring, at least for now. This means that the industry will most likely decide if there is a safeguard to implement. Many Wall Street people are now flocking there and have traditional ideas about protection. However, this space was initially created primarily by people without professional financial experience who may not fully understand what it takes to build a system capable of processing fast-paced modern transactions. I did.
Bloomberg Intelligence’s Tab said, “It’s a completely different view than when you’re looking at a traditional stock exchange where regulators have focused on safety, guarantors, and basically not going down. I have. “
Bankman Fried of FTX and Brett Harrison, President of FTX.US, both moved to cryptocurrencies after their traditional financial work, including the time they spent at trading company Jane Street. “We are used to how other exchanges work,” Harrison said. What goes up Podcast. FTX has what is called a price range, which prevents trading if you are too far from the current level. This is similar to what you see in the traditional market. “If you’re not growing up in that environment, you’re not thinking of doing this kind of thing,” he added.
Robert Zagotta, who worked for CME Group Inc, the largest derivatives exchange in the United States, is now the CEO of Bitstamp US, the crypto market. He believes that no one else in the industry is suffering from technology problems. “Competition doesn’t think it’s important to their success,” he said. “But based on my experience with traditional technology, I know it will come. It will be 2022 and 2023.”
Hack is also a big problem and vulnerable to cryptocurrencies that are deeply connected to the Internet, but in traditional finance, computers are often blocked from the Internet in protected data centers. Nasdaq was hacked about 10 years ago, but its core trading computer wasn’t compromised.
With cryptocurrencies, money always flows out of the project. Hackers stole about US $ 130 million (RM43 million) from Badger DAO earlier this month, but customers on the crypto exchange BitMart lost about US $ 150 million (RM627 million). rice field.
Cryptographic culture is simply different from traditional finance, so some strange things are inevitable. Consider the US $ 532 million (RM22.2 billion) non-fungible token transaction this year. More precisely, it seemed to be done, but it wasn’t really because the buyer and seller were the same person. Money did not change, except for transaction fees. In short, the only thing the pseudo-trading actually did was to draw attention to the hot NFT market. Maybe that was the point?
And because of a typo, some people mistakenly sold the Bored Ape Yacht Club NFT for about $ 3,066 (12,825 ringgit) instead of about $ 300,000 (1.2 million ringgit), about one-hundredth of what they intended. In the stock market, it could have been blocked by what is called a fat finger check. This is intended to prevent incorrect keystrokes from causing incorrect transactions.
Some are optimistic and believe that cryptography is becoming more robust, less prone to mistakes, and catching up with traditional financial or cryptocurrency TradeFi.
“In the old days, many exchanges had a lot of bugs and peculiarities,” said Michael Safai, founding partner of proprietary trading firm Dexterity Capital. “The exchange is steadily investing in the demand we saw last year to reach the professional level that TradeFi has been doing for decades.”
Still, much of the cryptography is built on the idea that there is no takeback — when a transaction occurs on the blockchain, it is assumed to be a completed transaction. Therefore, passwords that protect Bitcoin and other crypto assets should be carefully protected. Swiping it by a hacker, that is, swiping your coin, is much easier than putting the real dollar in the real bank account where insurance backs it up. And don’t lose sight of them. Some digital tokens are literally lost in the garbage dump when molding hard drives. It raises the question: is it too much to expect a crypto holdout and creates a big hurdle to mainstream adoption? – Bloomberg Opinion / Tribunnews Service