Satoshi Nakamoto left a large pair of shoes to fill after the Bitcoin (BTC) token was released to the world, which helped create the network, and then vanished without a trace.
Over the years, the crypto ecosystem has seen many developers and protocol creators rise in stature to become crypto christians for loyal owners who ultimately have their best plans end in disaster when the protocol is hacked, breached, or abandoned by eccentric developers.
2022 isn’t halfway complete, and the year has already seen a particularly bad aberration from goodwill, which collectively helped plunge the market into bear market territory. Here’s a closer look at each of these cases to help provide insight into how you can avoid similar outcomes in the future.
Some developers are anonymous for a reason
Satoshi may have remained successfully anonymous during the launch of Bitcoin, but in most cases since then, the presence of anonymous developers has become a red flag.
Many anonymous developers cite for personal safety reasons to take this route. While this is a good reason in some cases, sometimes anonymous developers hide from past mistakes or plan ahead to cover their tracks in case of future crimes.
A striking example is the Squid Game (SQUID), a memecoin inspired by the Netflix show that surged 45,000% in a few days after launch, only for traders to realize they were unable to sell the tokens on any exchange.
Investors eventually found out that all developers were anonymous and all social media channels were blocked from comments.
The crypto community grew to distrust anonymous developers, and this can be seen in the negative reaction to the revelation that the founder of the Non-Fungible Azuki Project (NFT) was involved in three other NFT projects that were eventually abandoned, leaving owners with little to show except for files JPEG that is worthless.
Another example of an anonymous developer becoming sinister occurred in 2022 when it was revealed that Anonymous Treasury Manager (TIME) @0xSifu turned out to be an alleged financial criminal, along with QuadrigaCX co-founder Michael Patrin.
The revelation of this association led to the collapse of several popular projects including Wonderland and Popsicle Finance, while a great deal of criticism was directed at Abracadabra, money maker Daniel Sistagali.
Before @0xSifu was revealed, all three protocols were seeing increased adoption, but each protocol is just a shadow of its previous success.
The presence of anonymous developers removes accountability from the equation and is increasingly becoming a red flag when dealing with multi-million dollar cryptocurrency protocols.
Beware of religious figures
Finance is no stranger to the cult of personalities and cryptocurrencies are not immune to this phenomenon.
Crypto critics will long remember Roger Ver as the “Bitcoin Jesus” and accuse the dismantling of Bitcoin Core and the creation of Bitcoin Cash (BCH). Billionaire Dan Larimer also comes to mind, and investors will remember him helping EOS (EOS) raise $4 billion during the initial coin offering (ICO) boom from 2017 to 2018. In each case, it was an enthusiastic swarm of followers who propelled each project forward. .
Neither BCH nor EOS has been able to recover all-time highs during the 2021 bull market despite all the hype about its future when it was first launched. Perhaps this is because part of the hype is centered around the personalities behind the projects.
A more recent example is the Fantom ecosystem token price crash after decentralized finance (DeFi) developer Andre Cronje deactivated his Twitter account and informed the community that he was leaving the crypto space entirely.
Cronje became so popular that many people would buy a token just to share it, and when he left, many of these investors got rid of their holdings, which negatively affected the price of the tokens.
While Cronje was doing what he believed to be correct and had no ill intentions towards the community, it appears that his actions negatively affected the crypto market due to his popularity within the community and the dedication of his followers.
The main takeaway is to be vigilant when a developer is seen as incapable of making mistakes and remember that cult-like followers can have results that transcend their community.
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Decentralization requires community involvement
Another red flag to look out for is Decentralized Autonomous Organizations (DAOs) and DeFi protocols that operate in a way that seems more centralized than its name suggests.
It is common for many protocols to claim that they are decentralized, but they rely on central service providers such as Amazon Web Service to make sure they work properly.