The cryptocurrency markets are sometimes referred to be the “Wild West” of banking and fintech: a dog-eat-dog environment, ambiguous from a legal standpoint, and much too complicated to attempt any form of order or control.
That description was likely warranted in the heady days of the 2017 ICO craze, given the numerous instances of unscrupulous operators hawking get-rich-quick scams to wide-eyed newbie investors.
Those days are, for the most part, gone. In reality, several of crypto’s largest players are starting to take efforts to rein in rules that are more severe than what is common in normal markets.
In late July, Sam Bankman-Fried, the CEO of FTX, one of the largest crypto exchanges, said that the company’s available leverage will be reduced from 100x to 20x in order to encourage “responsible trading.” Changpeng Zhao, the CEO of rival exchange Binance, quickly followed suit.
Regulators are gradually circling the cryptocurrency markets, which is a foregone conclusion given that cryptocurrencies are already a multitrillion-dollar asset class. And, unlike FTX and Binance, the topic becomes much more complicated when we include decentralized platforms and applications.
Aside from how transactions are confirmed, there are wider issues to consider, such as the functionality that the blockchain can handle, how it is maintained and improved, and how incentives are dispersed, to name a few.
These issues are handled off-chain on many systems, including Ethereum and even the Bitcoin blockchain, by a group of core engineers and miners. However, in the case of Ethereum, governance rarely extends to what occurs on the blockchain.
Over the years, Ethereum has been abused to create phony tokens, create shaky smart contracts, and had millions of dollars worth of value stolen from it in over 100 hacks. The Ethereum government has only interfered once. As a result, the Ethereum blockchain and community were irrevocably separated.