Blockchain is Here to Stay in 2022
Detrimental events in 2022 show crypto is at infancy stage and users funds are not safe. However, 2022 is high time to build for the long-term.
Posted in Thoughts on August 14, 2022 – 3 min read
The view and expressions on this post are my own and do not necessarily represent the postings, strategies or opinions of my employer. [Disclaimer]
With detrimental events happening in 2022, it is apparent that crypto is still at infancy stage
The repeated mistakes in crypto products put users’ funds at great risk
2022 is high time to BUIDL: Build for the long-term
Year 2022 is a reality check for everybody involved in the crypto space. According to Chainalysis, around US$1.4 billion were lost to breaches on cross-chain bridges this year. With several detrimental events piling up, starting from May: LUNA crash, cross-chain bridges getting hacked (e.g. Ronin, Harmony, Nomad etc.), centralized finance (Ce-Fi) services going bankrupt (e.g. Celsius), crypto VC Firms going bankrupt (e.g. 3AC), it is apparent that crypto is still at its very infancy stage.
We need to ask the question: Why do these scenarios keep happening? The repeated mistakes being made during the lifecycle of crypto products put users’ funds at great risk. These blatant rug-pulls, ‘accidental’ hacks, insolvencies, incompetencies of company leaders in the space, and the distrust among users are obvious red flags the average crypto user should avoid.
From a product development perspective, crypto products in general have a much shorter feature-to-market cycle. New features get shipped within weeks rather than months, compared to the much longer cycle of Web 2.0 products. Also, there aren’t many tooling around to properly test and QC features before they get pushed to production. The revenue brought by running these quick product iterations outweigh the cost of implementing proper checks. For example, the Harmoney Bridge is designed such that only 2 addresses from the multisig wallet are needed to approve transactions. That means, a malicious actor only has to gain access to 2 addresses to launch an attack on the 330M funds entrusted on the bridge. If they had conducted bug bounty programmes or have thoroughly audited the security design of their product, the attack vector could have be minimized.
From a business development perspective, as more and more native blockchains emerge, the need to provide interopability among multiple chains propells developers to rely on cross-chain bridges. Users that are provided with more liquidity and flexibility on their tokens, however, are also faced with more risk. This opens up the attack vector for hackers to compromise bridges and put users’ funds in harms way. The eventual merging of multichain into a single chain will sure be a long-winded progress and for crypto product teams this is has always been a choice between security and scalability (see more on The Blockchain Trilemma by Certik).
True Utility VS Perceived Value
To the builders in the crypto space, 2022 is the perfect time to build. In the bull run, there is a prolific number of cashgrab crypto products often ending in rug-pulls. These projects tend to be well promoted and the related token usually surges to a high point followed by a crash. On the other hand, in the Crypto Winter, there is much less motivation to quickly launch a certain product due to the lowered value of tokens. For the operator of those cashgrab projects, it costs much more to hype the price up to the same point during the bull run. To the average crypto investor, when evaludating the product value in these times, it is much easier to separate the muck (true utility) from the mire (perceived value of the token).