From “wild west” to “worthless,” crypto critics have called the asset class almost everything under the sun. Crypto proponents keep on pushing the benefits of financial inclusion and decentralization to counter these arguments, but what if the problem is deeper?
Researcher Catherine Flick worries that the crypto space might be suffering from a “colonialist mindset.” A space, that according to her, benefits from centralized entities and low-paid workers.
And the problem might not be limited to cryptocurrencies themselves, but to the entire ecosystem that includes NFTs, metaverse, and gaming.
The internet academic told Insider, “These people are kind of sailing their ships across the sea to get there first and plant their flags and make the money,”
Explaining further, she stated that it is “at the expense of the people who do the labor, who are less likely to make the same sorts of profits and who are more likely to be exploited or not understand what they’re getting into.”
Tech, not the saving grace of the crypto industry?
Flick, who is a researcher at the School of Computer Science and Informatics at De Montfort University, believes that tech might not be the savior that many are counting on.
Additionally, a recent report also noted that most of the hype around crypto or Web3 is being generated by the already wealthy participants. Therefore here, it is worth mentioning that Bill Gates had also warned ‘investors with less money than Elon Musk’ to ‘probably watch out’ in the crypto sector. He had stated, “I do think people get brought into these manias who may not have as much money to spare, so I’m not bullish on Bitcoin.”
With that being said, Flick also raises concerns about getting caught in these hypes and commented that “we’ve seen the recentralization of so much of the theoretically decentralized stuff.”
For instance, Flick believes that most NFT exchanges are, in fact, centralized because individual sellers find it hard to sell NFTs on their own and this wouldn’t be the case in a truly decentralized setting.
Wash traders taking retail money
In a report earlier this year, Chainalysis had noted that 110 profitable crypto wash traders have made nearly $8.9 million in cumulative profits, possibly from sales to “unsuspecting buyers” who believe in the asset.
Flick stated that “The people who win are the people who got in early, which is probably not going to be you. And the people who lose are going to be the people who are left holding the bag.”
We can recall that a similar argument of centralization had arisen back last year. It was in the context of China controlling over 60% of the mining hash power, right before PBoC’s policy decision to ban the activity altogether. Interestingly, the degree of ‘sufficient decentralization’ has also been some lawmakers’ parameter to decide if a cryptocurrency can be classified as a security by the U.S. SEC.
In the NFT space as well, the problem is not so different. “There’s a bigger problem here in the whole structure of how these economies build up,” Catherine Flick told Wired previously.
Critics argue that Web3 is controlled by VCs
Having said that, former Twitter CEO Jack Dorsey has also been a longstanding critic of Web3 centralization by venture capitalists.
Concerning this, crypto-analyst Faisal Khan had stated that VCs are “taking profits at the expense of retail.”
As per the researcher, “We see centralization because people need it to be easy to use, and they need to be able to see what’s for sale, and they need to be able to have nice user interfaces because they don’t understand it. They don’t want to understand it. They don’t care for the most part, probably.”
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