Elon Musk offered $6 billion to the U.N. World Hunger Programme in November, under the condition that the organization proves his donation can end world hunger. While not a crypto founder himself, the man crypto Reddit famously dubbed as “Papa Elon” offers a valuable lesson for industry leaders: If you want to help the little guy, do it. Don’t scam him in a pump-and-dump and dip with the cash.
Crypto founders can salvage the trust and image of the industry on top of which they sit so comfortably. What can’t continue to happen is crypto founders getting filthy rich, and becoming the very thing they set out to destroy.
Fairness in DeFi
Crypto enthusiasts, from small-time investors to company founders, often speak in hyperbolic language that positions the emerging crypto ecosystem as fairer than traditional finance, which has been rigged in favor of the elites for too long. Vitalik Buterin, co-creator of Ethereum and now the world’s youngest crypto billionaire, put it bluntly in a CNBC interview back in 2016.
“I say screw the big guy,” he said. “They have enough money already.”
Some have gone as far as to pronounce DeFi as the “do-it-yourself version of investment banking,” giving people the power to take control of their finances without feeding into the corruption and power imbalance that riddles traditional finance. Cryptocurrencies and blockchain offer a redistribution of power and control to ordinary people. Erik Finman, who became the world’s youngest bitcoin millionaire at age 18, tweeted a similar sentiment to Buterin’s: “What I love about Bitcoin is that instead of some rich old guy on Wall Street. Young poor people are the ones getting rich.”
It’s not just young redditors who are interested in using crypto to rebalance the power structure in finance. Jeff Scott Ward, who once held a position at the New York Stock Exchange, learned about Ethereum and immediately saw its potential to rid the financial industry of corruption. He hoped it would “dis-intermediate those who have time and time again broken our trust and have taken down the world economy without any meaningful repercussions.”
There’s no denying that crypto opens the door for many traders to win big, but this possibility can’t overshadow the likelihood of losing, especially for amateur investors. “If consumers invest in these types of products, they should be prepared to lose all their money,” according to the U.K.’s Financial Conduct Authority.
The flip side of the coin
If the idea is to help the little guy, why are so many so-called crypto projects doing the exact opposite? The Squid Game crypto coin scam is only one recent iteration of the ICO scams that gained notoriety four years ago, when more than 80% of ICOs conducted during 2017 were found to be scams. While the astronomical level of fraud is a thing of the past, especially with institutions and mainstream investors paying closer attention to digital assets, the culture of crypto people enriching themselves through token sales only to behave like Wall Street finance bros certainly is not.
Take the Bored Ape Yacht Club, for instance. The group of NFT investors swimming in cash after the floor price of the NFT collection shot up to a floor price of $200,000 actually staged a meetup in New York City to celebrate their gains. The club’s members regularly flaunt their lavish lifestyles on Twitter, in what could only be seen as perhaps an even more public display of what the world knows as Wall-Street bro culture.
The very name of the luxury NFT collection even plays off the culture of “aping” into investments, or in other words, throwing money into a newly launched crypto project without having done any previous research whatsoever. The idea is to get rich quick, and it has its roots in founders with the same intention.
The examples are endless. Stefan He Qin, a cryptocurrency hedge fund founder based in New York, recently pleaded guilty to using $100 million of investors’ money for his own luxury penthouse apartment and other personal purchases, beginning as early as 2017.
Similarly, in what many consider to be the biggest cryptocurrency fraud ever charged criminally, prosecutors discovered that BitConnect, an open-source cryptocurrency, operated as a Ponzi scheme to defraud investors out of over $2 billion.
All of this contributes to a culture of hype-investing that gives newbies the false impression that everyone investing in crypto becomes wealthy. The general manager at Lamborghini Newport Beach in Costa Mesa, California, for example, saw sales of the car spike as the price of Bitcoin skyrocketed. Though these success stories exist, they are not common for everyone. Around 13 percent of all Bitcoin, or around $80 billion, sits in just over 100 individual accounts, according to recent industry data published by Telegraph.
Those who aren’t sitting on top of the crypto hierarchy are even more vulnerable to crypto’s downsides, like market uncertainty and volatility. The best way to remind the little guy of the good in crypto is simply community altruism.
Practice what you preach
There is a growing need for people to do better in crypto, not only to promote good in the world, but also to win over mainstream audiences skeptical about where crypto’s beating heart lies. We saw Buterin donate $1 billion to help fight COVID-19 in India and other charities in May, but few philanthropic deeds from leaders have circulated the news since.
Although now it seems good will in the crypto world idly lingers, it is still actively encouraged. Just look at the “meme coin” communities: DogeCoin’s #DoOnlyGoodEveryday mantra led to an influx of donations to animal shelters, churches, and charities with crypto, as well as pushing the American Cancer Society to open the first-ever cancer fund exclusively accepting cryptocurrency donations.
With social trading and collaboration on the rise, it’s clear industry members can join forces to reach a shared goal; so blockchain-based governance solutions, like Decentralized Autonomous Organizations (DAOs), are ideal for charity implementation. Dynamic, transparent participation, voting engines, and verification of members’ charitable intent enable DAOs to avoid corruption and flaws that riddle the traditional charitable giving process. Crypto leaders might be abandoning their initial reason for entering the industry, but it’s not too late to bring order and goodness to “the Wild West” of finance and reassure mainstream investors that there is in fact more to crypto than lies