Centralization isn’t inherently bad . . .

. . . but centralization, non-transparency and no protection from the code has always ended badly.

Mt. Gox : a centralized exchange hacked for millions of Bitcoin

• A centralized exchange where 80% of all Bitcoin trades were done at that time.
• The Bitcoin left the safety of it’s owners wallets, and was stored on the exchange wallets.
• ‘The exchange was hacked and thousands of investors lost their Bitcoin, and the legal process took over five years to unravel.

The Steem takeover using Steem stored on exchanges.

• Someone (Justin Sun) was able to borrow Steem owned by investors and stored on centralized exchanges and use the voting power of that borrowed Steem to vote themselves into power and create a code HardFork which allowed them to take over the platform.

Terra Luna centralized project lost billions of investors money.

• A decentralized finance project, whose faulty Tokenomics were criticized, but people who criticized it were excoriated by the cult-like following of the young genius creator
• The investors didn’t understand the vulnerabilities of the platform, were uninformed or chose to ignore those vulnerabilities.
• So when the exchange got into trouble, the investors were not in control of their funds, and couldn’t withdrawal them.

Voyager, 3 Arrows Capitol and Celsius

• Decentralized Finance projects where the lack of transparency meant people didn’t know how their yields were being generated.
• Their money was deposited there in the exchange wallets giving the exchange 100% control over their funds, which were sent to other projects as loans, but not collateral and there was no insurance to protect the investors.
• When their investments into Terra Luna, a centralized project, were frozen, these projects were just as helpless as an individual investors and they were unable to get their investors money back.
• ‘The loans were uncollateralized so investors may lose everything.

FTX

• A centralized exchange, which lacked transparency, but specialized in complexity, led by a genius young man
• Critics were often excoriated by people saying he is a billionaire, who are you?
• Multiple institutions and individuals deposited cryptocurrency on the exchange, or invested in the exchange directly or through buying the exchange token.

What have we learned?

• Some might say.. not much.
• Others, who are more generous might say, we are learning not to leave our cryptocurrency on exchanges.
• Use them to get your fiat currency from your bank to the exchange, buy your desired crypto and move it off exchanges to your computer desktop wallet, web browser based wallet or cold storage wallet like a Trezor, or Arculous.
• Deal primarily with decentralized exchanges which allow your wallet to interact directly with trading pairs, and don’t store your money on centralized exchanges which require you to send your crypto from your wallet address to their wallet address.
• Don’t stake your cryptocurrency on an exchange or website, unless you retain control of it by your wallet interacting directly with the investment, not by sending your crypto to another wallet.
• Where’s your crypto and what is it doing?
• How do you know your deposits are safe
• Its pretty dam hard to know if your using a centralized exchange to store your crypto
• Know who you park your money with
• • I know who runs Leofinance, Cubfinance and Polycub
• • I know the code is not only audited, but code shuts the known back doors, time locks and limited minting protect against rug pulls, and the blockchain explorers, and my own vigilance protect my funds..
• Diversification, Vigilence, Knowledge, Hardwork and engagement are all needed to protect your funds.

The Irony

• Cryptographic wallet protection is the safest technological way to secure your funds in the world. But practically every financial tool available requires you to remove your funds from this protection.

We are early in the development of this technology.

• We are so early in the development of cryptocurrency, that we take a permissionless and trustless structure and layer onto it a permissioned and trusted system, which sacrifices all the cryptographic security.
• And one day we may look back and laugh at our carelessness, but for now all we can do is console those who lost their cryptocurrency, fight for them when we can vote or agitate for them to be made whole.
• And continue to learn what we can about protecting our assets.

@shortsegments

Posted Using LeoFinance ^Beta