Post-market Fallout: A peek into the decentralized crypto future
The Twin Ideals of Blockchain
With its decentralization feature, blockchain aims to do away with the need to trust third parties, particularly centralized ones which lack transparency. The risks of a lack of transparency are highlighted by the collapse of TerraUSD and the FTX fallout due to either a palpable lack of transparency in the algorithmic protocols or the management framework.
With this, let’s dive into how the decentralized crypto future is shaping up:
1. Doubtful Transparency Initiatives from CEXs
Besides publishing their proof-of-reserves (PoR), CEXs has not undertaken any further action to enhance their transparency levels. The limitation of PoR is that they are of doubtful utility for two main reasons:
- They are not audited through KuCoin is charting the path for audited PoR by engaging audit firm Mazars to verify its reserves but the fact that FTX was audited by two separate firms i.e. Armanino and Prager Metis didn’t prevent its fallout.
- They do not include the liabilities of a publishing CEX as these liabilities are off-chain thereby rendering the PoRs to be not giving the full picture of the financial position of the publishing CEX.
2. Aye to DEXs, Nay to DeFi Protocols
DEXs have been the main benefactor from the massive exodus from CEXs post FTX-fallout with the DEX to CEX spot trade volume percentage recording a sharp rise following the fallout.
Nonetheless, the TVL of DeFi protocols which have already been battered by the collapse of TerraUSD has dipped even further in the wake of the FTX-fallout.
The 56% crash in the price of SOL tokens from USD38 to USD12 in the week of the FTX fallout triggered mass panic among the community with Solana validators who provide security to the blockchain unlocking nearly USD 800 million worth of their SOL holdings (about 5.4% of the token’s total supply) in the span of just a few hours.