Devs trying to replicate traditional economies on-chain defeats the purpose of crypto
It doesn't automatically become “different and better” simply because you slap a pretty “decentralized” term on it.
Developers need to stop otherwise crypto just becomes the stock markets 2.0 and essentially the governments playground, yes, even with our tech to oust them.
Since Bitcoin, almost everything after has been about bringing traditional finance and economic systems onchain.
Most crypto projects don’t introduce groundbreaking crypto-native mechanisms. Instead, they mostly try to replicate real-world economic structures on-chain without leveraging decentralization, censorship resistance, or trustless automation in a meaningful way.
Notice how everyone is suddenly cool with dollar-backed stablecoins even though the goal was to move away from the USD? Some even say that this is how crypto stops needing off-ramp services.
Well, that is true, but it's also how crypto gets heavily tied to price movements and policy changes in traditional markets and last time I checked, that close-influence ≠ good.
Decentralized money needs non-conventional solutions
Crypto developments have worked with a playbook that just mirrors traditional finance and economic systems over the years and it has failed accordingly because not only is the mirrored system running on terrible policies, crypto lacks the financial backing to keep the mirror-scam looking “OK” for long.
Take decentralized finance(DeFi) for instance, most of DeFi products are ultimately based on a design that expands debt positions, essentially functioning as a traditional bank that spreads widely through fractional-reserve banking.
The problem? Well, most businesses whose major product is “collateralized lending” pray to God that you default on your debt, that's a 30% profit atop of yield these protocols go chasing with those secured assets.
But unfortunately, it doesn't work out as planned because first off, crypto is too volatile to be guaranteed a profit and most smart money collateralize stablecoins to borrow assets like ETH simply to short the market and make bank.
Yes, that actually happens because these protocols literally serve as OTC sources to get fixed price purchase deals on assets they can immediately dump on the markets. Matter of fact, even said DeFi platforms may engage in this if they attract enough non-stable asset deposits into the protocol and in the process, may end up liquidating their customers.
DeFi is barely decentralized and permissionless
Everybody loves to talk about how the blockchain is decentralized and data is distributed across multiple nodes or computers, essentially making them censorship-resistant and tamper-proof.
That is cute, it really is. When it comes to DeFi, we get lots of smart contracts talks, how they automate finance management and enable individuals to grow their income without intermediaries.
Last time I checked, there's not many retail investors that can boldly say that DeFi has helped them grow their finances sustainably because most of what was marketed over the years were ponzi on the blockchain. High yield to attract gullible investors, whilst the project slowly rugs through fee mining, arbitraging and the list goes on.
There's many such cases. The few protocols that have survived are mostly whale dominated and this is mostly smart money, retail doesn't have a shot at being profitable in these things, it's just not set up to be beneficial to small fishes.
Revenue runs into the hands of high stakes increasing their governance influence in DAO set up to max tax users into treasury accounts that are just fancy terms for “team exit pockets” because if you have to tax to fund developments, you're no different from the government and you cannot, accordingly, be held accountable.
Beyond these flaws is also the sad reality of some so-called DeFi protocols not being open-source and the case of frontends being hosted on centralized servers.
The latter is a very common scenario across most crypto projects and it's simply not the way it should be. The frontends are what consumers can see and interact with. If that is centralized, what really is the value of the underlying chain being decentralized?
It's not enough that it's based on decentralized blockchain or that its code is open-source, changes can be made that aren't available on the repo. To fully achieve DeFi, everything from smart contracts to frontends need to be hosted by a distributed network of nodes.
Anyone should be able to plug in and keep the service running at any time but I guess that defeats certain elements of reliance.
If the access points(frontends) are centralized, it's not permissionless. People are first familiar with what they see and interact with before what's underlying that powers it.