Last week, crypto markets crashed. Hard. Any investor, crypto or traditional, knows to expect crashes, but there was something especially off-putting about the way the decentralized finance markets crashed.
The tl;dr is this: The crypto markets crashed last week and that caused a panic sell-off. In the rush to sell Ether, the Ethereum network became so congested that gas prices skyrocketed. In many cases, the cost of the transaction was more than the transaction itself. This had a trickle down affect that significantly impacted DeFi. People with collateral debt positions suddenly had their positions under-collateralized because the price drop. For the lucky few that knew to check on this, they had an opportunity to add more collateral (Eth) to keep the position open, but when they tried to execute the transactions they found fees to be upwards of 125% the amount they were trying to collateralize. And in some cases, including on MakerDAO’s Oasis app, the gas fees were so high, the application couldn’t even support the transaction.
The above is part one of the two-pronged problem, and it’s a bad one. People were liquidated. Applications failed to work. The experiment of DeFi proved itself to truly be an experiment after all.
The second problem is potentially much bigger. Not everyone knew they needed to constantly monitor their positions. For some, especially those who came from traditional finance, they expected price alerts and communications that would help them understand what was happening. What they got instead was…nothing. If these people were not already on Twitter or Discord or Telegram, they were out of luck.
The fundamental flaw in how crypto builds is the assumption that everyone is technical and everyone will be technical. Mainstream users don’t hang out on Discord. The ones that hang out on Twitter aren’t following crypto accounts. Last week’s events proved two things:
- There is more engineering work to be done on the underlying protocol (Eth 2.0 will hopefully solve that).
- Builders need to communicate with their users properly, not through Twitter, Discord, and Telegram.
It is no longer acceptable to talk out of both sides of our mouths in crypto. We can’t say we want mainstream adoption while at the same time refusing to implement basic communication tools to help those mainstream users (and the crypto-savvy users) stay better informed.