Latest news about Bitcoin and all cryptocurrencies. Your daily crypto news habit.
The spectacular recent collapse of FTX is a key moment in the story of crypto and decentralized finance. It provides another stark example of the dangers of centralized institutions, especially those with a real deficit in transparency and accountability.
For the visionary ethic signaled in Satoshi's famous white paper for Bitcoin, FTX proved to be a diversion, and then a catastrophic dead-end. The answer, though, naturally lies in that same ethic.
The lingering dangerous allure of centralization
Despite the decentralized nature of cryptocurrencies, most people remain in the habit of trusting centralized bodies and institutions, whether banks in tradfinance or CEXs in crypto. The collapse of FTX stands as yet another reminder - a wake-up call, even - to the dangers of not examining this trait.
The FTX debacle provided Binance with an opportunity to glide into the credibility gap and attempt to paint itself as a crypto savior to wavering investors. But is another CEX the answer? Especially one with its own checkered past, and a present where its stability and capitalization are questioned. Logic suggests the answer lies in diving deeper into decentralization, rather than seeking out another centralized haven.
Individuals need to know what projects are doing with their money. Companies and organizations in the crypto space need to be more transparent and accountable. While many individuals might still be reluctant to make the switch and take more responsibility for managing their own assets, the shrewd move suggests venturing further into DeFi.
Why DAO? Why now?
Increasingly, the DAO solution emerges, representing to users the obvious answer to trust issues. Just before the collapse of FTX, DAO participants had already reached more than 1.5 million worldwide, up from only a few thousand in 2021. After FTX, and other recent notable failures, such as Celsius, eyes have naturally been turning to a decentralized solution.
The DAO guarantees transparency and democratic governance, and therefore represents a formidable new way to manage collective finances. Via its smart contracts, a DAO’s activities and governance can be programmed to run automatically. Power is therefore disbursed from the founders - where problems can only too clearly arise - into the wider body of all DAO participants.
Regulations are stored in the blockchain’s smart contracts, while its native coins facilitate network security and mediate voting rates. Via these voting rights, users themselves can actively participate in shaping the evolution of the ecosystem. Only coin holders have the right to change a DAO’s regulations. Unlike with banks, or exchanges like FTX, via inspection of its blockchain any DAO participant can audit the treasury and view all transactions.
DAO members make decisions on the transfer of funds, investment and withdrawal of money. Additionally, those interested in having a DAO manage their money need not even be a DAO member. While such individuals won't have a vote in the DAO’s operations, they crucially have the facility to monitor the DAO voting process and how their money is handled, establishing unparalleled trust.
DAOs are permissionless, democratic, transparent, efficient, customizable, and also adaptive to regulatory oversight. They are everything that centralized operations like FTX are not.
The DAO is the herald of a truly decentralized finance.
Author Bio
Vlad Shavlidze is CEO of XDAO.app. XDAO is a multichain DAO builder for jointly managing crypto assets and DeFi projects.
Disclaimer
The views and opinions expressed in this article are solely those of the authors and do not reflect the views of Bitcoin Insider. Every investment and trading move involves risk - this is especially true for cryptocurrencies given their volatility. We strongly advise our readers to conduct their own research when making a decision.