3 red flags signaling a cryptocurrency project may confuse investors

3 red flags signaling a cryptocurrency project may confuse investors

After Satoshi Nakamoto released the Bitcoin (BTC) code to the world, helping to establish the network, then leaving a pair of shoes to fill after disappearing without a trace.

Over the years, the crypto ecosystem has seen many developers and protocol creators become crypto messiahs to trusted holders whose ultimate plan ultimately turns out to be a disaster when the protocol is hacked, cracked or abandoned by the developers.

2022 has just passed halfway through and the year has already seen a particularly bad spread of misguided good intentions, which collectively helped plunge the market into the bear market area. Here’s a closer look at each of these examples to help provide insight into how to avoid similar results in the future.

Some developers are anonymous for a reason

Satoshi may have successfully gone anonymous when launching Bitcoin, but since then in most cases, being an anonymous developer has become a red flag.

Many anonymous developers cite personal safety reasons for using this route. While this is a valid reason in some cases, developers sometimes hide from past mistakes or plan in advance to cover their tracks for future crime.

A striking example of this was Squid Game (SQUID), a meme coin inspired by the Netflix show that rose 45,000% just days after launch, only traders realized they could not sell tokens on any exchange.

Investors have finally discovered that all developers were anonymous and all social media channels were blocked for comment.

The crypto community has become increasingly skeptical of anonymous developers, and the negative reaction to the revelation that the founder of the non-fungible token project Azuki (NFT) was involved in three other NFT projects that were eventually abandoned, except for useless jpegs to show their holders Leaving a little something for.

Another example of an anonymous developer rogue occurred in 2022, when it was revealed that Wonderland (Time) anonymous Treasury manager @ 0xSifu had turned out to be an alleged financial criminal, Michael Patrin, co-founder of QuadrigaCX.

1 / Today we will have complaints about team members 0xSifu. I want everyone to know that I was aware of this and decided that a person’s past does not determine his future. We choose to value the time we spend together without knowing your past.

– Daniel never asks DM (andanielesesta) January 27, 2022

The unveiling of the connection led to the collapse of several popular projects, including Wonderland and Popsicle Finance, while Abracadabra.Money creator Daniel Cestagalli received significant criticism.

প্রকাশ Before the release of 0xSifu, all three protocols were seeing greater adoption, but each protocol was merely a shadow of its previous success.

Being anonymous developers removes liability from the equation and is becoming a growing red flag when dealing with multi-million dollar cryptocurrency protocols.

Beware of personality culture

Money is no stranger to personality religion and cryptocurrency is not immune to this phenomenon.

Longtime cryptocurrency experts will remember that Roger Verr was called “Bitcoin Jesus” and led the charge of forging the Bitcoin core and creating Bitcoin Cash (BCH). Billionaire Dan Larimer also comes to mind, and investors will remember how he helped EOS raise $ 4 billion during the 2017 to 2018 Early Currency Offer (ICO) boom. In each case, they have seized it, despite obstacles we can scarcely imagine. “

Neither BCH nor EOS were able to regain their all-time high during the 2021 bull market, despite all the hype about their future when they first launched. This is probably because some promotions focus on the personality behind the project.

The Phantom ecosystem includes a recent example of the fall in token prices after decentralized financing (DeFi) developer Andre Cronje deactivated his Twitter account and informed the community that he was leaving the crypto space altogether.

Cronje became so popular that many people would buy a token because he was involved and when he left, many of these investors abandoned their holdings, which negatively affected the price of the token.

Previously, the brand / marketing of Phantom was Andre Cronje.
Now we do not have that identity.
It is not advisable to focus on branding / marketing right now, it is an absolute necessity.

– Jack the Oiler (@JackThoiler) May 7, 2022

While Cronje was doing what he thought was right and had no ill intentions towards the community, his actions seem to have negatively affected the cryptocurrency market due to his popularity in the community and the dedication of his followers.

The main lesson is to be careful when a developer is seen as incapable of doing anything wrong and to remember that cult-like followers can get results by going outside their community.

Decentralization requires community involvement

Another red flag is decentralized autonomous organizations (DAOs) and DeFi protocols that operate in a way that feels more centralized than the name suggests.

It is common for many protocols to claim that they are decentralized but rely on centralized service providers such as Amazon Web Services to ensure that they work properly.

Due to a major AWS disturbance, the dYdX Exchange is currently inactive. We are experiencing increasing delays in services and endpoints that are not working and the website is not loading.

For the most up-to-date status updates, subscribe here: https://t.co/EvjpZdRyby

– dYdX (@dYdX) December 7, 2021

Another pertinent example is when a project that claims to give token holders the right to govern, decides on an important protocol without consulting the community for feedback and approval.

Terra USD (UST) has touted the Terra (Luna) move to add BTC to its treasury as a parallel to Stablecoin and has been praised by many, but the move has never been voted on in the Terra community to see what token holders think.

While there is a good chance the plan will pass and Terra will fall, the blame will fall more on the community and less on project leader Do Cowan. It is also worth noting that Dow Kaun has developed a culture of personality and has often insulted different people on Twitter.

One of the key principles of the cryptocurrency industry is adherence to decentralization and failure to do so often leads to an uncompromising network and dissatisfied investors.

The opinions and opinions expressed herein do not necessarily reflect the views of the author and not necessarily those of Cointelegraph.com. Every investment and trading step involves risk, so you should do your own research when making decisions.

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