Under extreme stress, the decentralized finance system worked as designed.
The cryptocurrency market means different things to different people. To many, it represents an object of naked speculation, which consumes almost all the media coverage about the space. For these people, Wednesday was a bad day, with the Bloomberg Galaxy Crypto Index plunging 19.2% in its worst slide in more than a year. But to others, the crypto space is more than speculative instruments. It is the construction of a new financial system. For them, Wednesday was a huge win that might go down as one of the best days in crypto history. Under extreme stress, the system worked as designed. Yes, problems were uncovered, such as high fees to trade at the most volatile moments. But this is a known problem because the crypto platforms are running at 100% capacity. Solutions to add more capacity and efficiency have been in the works for months and should be operational by year-end. To understand why I believe Wednesday was a big victory for crypto, separate the space into its two main categories: centralized and decentralized finance. Centralized is the most familiar. These are the regulated exchanges such as BlockFi Inc., Coinbase Global Inc. and Binance. They run traditional order books with bids and offers much like the New York Stock Exchange. And much like Robinhood Markets Inc. and other traditional brokers, when markets get hectic, they are saddled with delays, system outages and frustrating customer experiences. These events lead many to conclude that the crypto space is not ready for prime time. But the decentralized protocols, which many claim are the future of finance, worked as designed and never went down.
