Does the extradition of one prominent crypto player imply that cryptocurrencies are inherently flawed?

Does the extradition of one prominent crypto player imply that cryptocurrencies are inherently flawed?

The eccentric geek whose brilliance may unleash the potential to make digital billions is no longer the man who greeted presidents, prime ministers, and celebrities in shorts and a T-shirt.

Sam Bankman-Fried being hurried out of court in Nassau to a blacked-out SUV that would transport him to an airstrip and an extradition flight to New York is one of the most iconic images of the year in crypto.

For the most well-known bitcoin player, 2022 has come to a sudden and harsh end.

The eccentric geek whose brilliance may unleash the potential to make digital billions is no longer the man who received presidents, prime ministers, and celebrities in shorts and a T-shirt.

Instead, he is the target of a vast scam. He is suspected of using client funds from the cryptocurrency exchange FTX to pay off his losing wagers and support a lavish lifestyle in a Bahamian penthouse while promoting the idea that he made millions helping the less fortunate.

On Wednesday, prosecutors said that two of his closest business associates, his co-founder and the former girlfriend who oversaw his cryptocurrency hedge fund, had changed sides, admitted guilt, and provided evidence against him.

The man, who goes by SBF, has maintained that nothing was done on purpose and that the siphoning of consumer funds into his own accounts was due to ineptitude rather than venality.

But with tens of millions of those funds going to political donations, Washington is as ashamed as famous people like Tom Brady, whose endorsements were flashed in FTX’s extravagant marketing efforts, and the future is gloomy.

Was it a given?

For the cryptocurrency sector and the larger field of digital assets, the issue is whether FTX’s collapse is an inevitable symptom of a sector that, in offering to magically create value out of the electronic ether, has always been lacking in trust and credibility and ripe for corruption.

Or is SBF just a traditional embezzler, as his successor as CEO of FTX claims, whose alleged misdeeds were only complex in the way they were concealed in plain sight? And if so, would the wild volatility of dubious assets, unexpected collapses, and drawbacks continue to plague digital assets in the future?

It had already been a trying year with a slew of summer failures, including that of cryptocurrency lender Celsius and the Terra-Luna network, as well as a controversy involving its own wanted man, Do Kwon, who was the subject of an Interpol red alert and a request for his arrest in South Korea.

The value of the original cryptocurrency, Bitcoin, dropped by 75%, wiping away billions more. A large portion of this money came from individual investors, whose eagerness to trade real money for digital ciphers powers the cryptocurrency industry.

The instances, according to economist and well-known crypto-skeptic Frances Coppola, are a result of the goods’ fundamentally unsound character and have been accelerated by the general economic environment where cheap money is no longer readily accessible to top off the punchbowl.

“During the period that cryptocurrency has existed, it has promised much and achieved very little, except several booms that have since burst spectacularly,” she claims. We have had three big crypto bubble bursts in a short period of time, and it is unclear when or even if the market will recover from this.

“I believe that the FTX phenomena, along with Terra, Luna, and Celsius, is a result of the recent crypto boom. It’s not really shocking that everything collapsed when the Fed [US Federal Reserve] decided to tighten monetary policy together with other central banks, and when all the money that had been pushed into the global economy during the pandemic was removed.”

Wild volatility is a draw of cryptocurrencies.

The extreme volatility that has been so expensive this year seems to be a key component of cryptocurrency’s allure. A retail version of the wild derivatives trading exposed to the public at terrible cost in 2008, speculation and the potential to significantly leverage bets by borrowing from exchanges feel more like gambling than investments.

That hasn’t stopped institutional investors from becoming more interested in cryptocurrencies. Banks are reacting to institutional investors’ demands after some of the largest venture capital firms in America lost money in FTX because to their unwillingness to pass on an estimated trillion dollars’ worth of new digital assets.

The next two years will be critical for the widespread adoption of digital banking, according to Waqar Chaudry of Standard Chartered bank: “We believe that digital assets are here to stay for the long term. A bank’s main responsibility is to offer services to its customers wherever they are.

“Large institutions are coming into cryptocurrencies due to demand from the perspective of institutional banking. They are talking to us about their ambitions and how they will look over the next 12 to 24 months as they move into that sector, which means they require service providers with a history in financial services.”

In the meanwhile, the business sector is closely examining the technology that lies beneath. Long thought to have revolutionary potential, these “distributed digital ledgers” replace clearing houses or intermediaries with a public network of scrutineers and airtight encryption.

Blockchain has felt like the correct question solution for years, but now there are several paths that are becoming evident.

The exchange of goods

They are essential to the next phase of digital living, known as “the economy of things,” according to Philip Skipper, Vodafone’s head of technology for the internet of things.

“You can already communicate with our gadgets. When these gadgets interact and exchange money with one another, it is the economy of things.

“So as you’re moving along a road, your electric vehicle may be able to communicate with a traffic light, and you may be able to purchase access to a congestion fee for the following 50 yards. It has to do with how well these gadgets can communicate and cooperate in business. That is how things work economically. How you connect all of those plays together is the basis for it, and blockchain plays a crucial part in that.”

The technology may also change the world’s supply networks, which have been severely affected by COVID. Smart money, which might link payments to quality and delivery at each stage of a production process, is made possible by the marriage of blockchain technology and solid digital currency.

State-controlled money, on the other hand, restricts a citizen’s ability to spend how and when they like. Imagine receiving social assistance exclusively in the form of digital tokens that can only be unlocked for approved goods.

Given the potential for both good and bad, government regulation is crucial, and there should be a public discussion about what we really want from our money.

A recurring thread among the disastrous failures in cryptocurrency this year is the lack of regulation. Ironically, they will play a key role in determining the future of cryptocurrency and blockchain, despite the fact that the technology promised to circumvent established institutions.

Mello
Entertainment analyst, Blogger, Web Designer, Producer on Accra Fm, Artist Manager