The proliferation of fraud, scams, and meltdowns suggest that they don’t — but price isn’t the only way to measure real-world value.
January 11, 2023
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After each high-profile crypto meltdown, there have been renewed calls for greater oversight of the space. The idea here is that if we regulated crypto players like traditional financial institutions, they would start behaving like ones. But a regulatory framework that is purpose-built for the technology would not change the underlying incentives for reckless and fraudulent. For the crypto industry to have a positive impact on society, we need to first overhaul how it measures progress — and success.
The events of 2022 have called into question whether crypto will (or should) survive. Before FTX collapsed in November, there was the meltdown of stablecoin Terra and its companion coin LUNA, as well as the related implosions of crypto lender Celsius, crypto broker Voyager Digital, and hedge fund Three Arrows Capital, to name a few of the most dramatic failures. At year-end, there were questions about FTX’s onetime rival Binance, which has been confronted with large-scale customer withdrawals and criminal investigations over its compliance practices. Only 12 months ago, many of these companies were lauded as examples of how vision, bold thinking, and audacity could build multi-billion dollar empires overnight. Now, they offer very different lessons.
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Christian Catalini is the founder of the MIT Cryptoeconomics Lab. He was one of the co-creators of Diem, and the Chief Economist of the Diem Association. He is also co-founder and Chief Strategy Officer of Lightspark.
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Jane Wu is an Assistant Professor of Strategy at UCLA where she conducts research at the intersection of innovation, entrepreneurship, and strategy. Her current work focuses on the role of metrics in shaping firm innovation. She also studies the entrepreneurial strategy choices that high-growth startup founders encounter.
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