New Crypto Dawn. My 10 years in crypto

When I started doing crypto back in 2014, things looked very different. There was much more discussion about DAOs, decentralization, and new governance models than there is now. The monetary aspect of crypto was perceived by many as just a part of the whole — important, but not the only purpose of blockchain technology. It was conjectured that blockchain could change the fabric of society itself, and new finance would find its place there automatically.

A lot of time has passed since then; currently, crypto seems to be just a glorified retail Forex, where people trade memecoins instead of trading the EUR/USD pair on x1000 leverage (but they do trade memecoins on leverage as well). Ironically, instead of improving and decentralizing things, crypto seems to enhance and bolster all those centralized business models and structures that we wanted to get rid of. It’s hard to imagine something more centralized in terms of internal structure and setup than a run-of-the-mill memecoin, for example. Current crypto requires a lot of TRUST from its users, which is doubly ironic since crypto was supposed to be TRUSTLESS.

It’s not that the current state of crypto is totally unexpected and came out of the blue; the consistent erosion of the decentralization narrative started around 2017–2018 with the emergence of massive venture capital coming to crypto. One might also argue that Bitcoin itself, despite giving the world blockchain technology, leads to creating quite centralized top-down structures, which are not much different from traditional financial ecosystems such as the stock market.

I had always been trying to develop the Waves ecosystem based on the vision that inspired me around 2014 — blockchain as the first example of fully protocol-based social interaction that can potentially replace (or enhance) social consensus with technical consensus. At the same time, it was impossible not to follow the mainstream trends such as DeFi, TVL growth targets, and the like. It seemed that it would be easiest to onboard people into the beautiful and shiny Decentralized Future through the instruments more familiar to them. Compromising between the “true nature” of blockchain and creating products mostly focused on purely financial applications seemed to be the only working strategy, in light of the general hype around crypto and a lot of people making a fortune out of it.

But compromises never work, and the recent history of the Waves ecosystem is further proof of that. The USDN stablecoin was meant to create a very simple and appealing product for the mass market by creating an algorithmic stable asset tied to USD and providing staking interest based on intrinsic mining mechanics of the Waves blockchain itself. USDN could be issued for Waves, Waves collateral was staked with network validators, and the mining rewards were channeled back to USDN holders. Basically, it was a wrapper for Waves tokens with an APY of around 10%, a simple product easy for users to understand.

At its peak, USDN market capitalization exceeded 1 billion USD; a lot of effort was applied to boosting USDN visibility and incorporating it into different products on Waves. Waves tokens locked in USDN provided a good APY for USDN holders and reduced Waves free float, which also had a positive effect on USDN staking profitability. It all came crashing down, though, when the Waves token was heavily shorted during the FTX and Luna collapses. This led to insufficient collateralization of USDN and its sell-off, which crashed its 1 dollar peg and triggered huge losses for the users of several DeFi protocols and centralized gateways on Waves.

I must say that I firmly believed in the soundness of USDN design; it could have withstood 99% of different market scenarios. But it did not account for that 1% of black swan events that can irrevocably bring the system out of equilibrium. So I learned two lessons here:

1. Architectures we create should hold their ground in all possible situations, however improbable they may seem.

2. Never compromise on your vision.

Waves is still struggling with the aftermath of that situation. We are launching new products now to make up for the lost value and compensate the users. All ecosystem operations have been put on a DAO footing and a new original DAO protocol was developed. I, for one, sold all of my Waves tokens more than a year ago to make up for the users’ losses as much as I could. Since I’ve never owned any other assets other than Waves, it makes things a little complicated for me personally, but a lot of people have it much worse than me, so I really can’t complain.

And it makes my commitment to get back to the vision of the crypto dawn even stronger. The future of crypto is inextricably tied to the future of the world, and vice versa. It’s time for crypto to offer new models of social interaction going beyond pilot projects and simple token DAOs. This is what crypto can really deliver if we properly set our minds to it now. And Waves, with its complicated history — of which the USDN situation is just a small (but undoubtedly prominent) part — is the right ecosystem for that. I am disillusioned (as in not having any false expectations or illusions anymore) but very committed. Let’s decentralize everything or die trying. It’s a watershed moment for the world and for crypto. Choose your fighter now!