Exit scams are the worst nightmare of cryptocurrency investors. the worst losses have resulted from project owners abandoning their projects in a very unprofessional manner. Every failed project spells huge losses for investors; the gravity of this loss is relative to how much an investor is invested in a project. In some cases, the project owners feel the loss too…arguably. When a project fails, it is mainly because things didn’t go as planned. In cryptocurrency, the most popular reason is inability to develop the proposed technology. Marketing failures have also caused many projects’ failure. In any of these cases, prevailing circumstances is all there is to be blamed. Things didn’t go as planned, despite developers and the rest of the team putting in tangible efforts. But this is very different from exit scams.
Exit scams are arguably the most toxic events in the crypto space. For a technology which portrays security as one of its virtues; blockchain and cryptocurrency have suffered extremely from human vices. Hacks follows up closely in my list but exits scams remains top, by far. ‘84% price loss withing 24 hours’, an absolute nightmare. An unsuspecting investor wakes up to an unimaginable loss. Whenever this happens in cryptocurrency, the most predictable answer is an exit scam by the project team. This could result from a project team selling their stakes in the project, minting and dumping huge number of tokens on the investors or numerous methods through which a team could exploit a project and drive value beyond recovery.
Early cryptocurrency investors probably suffered most from this practice. Project teams were quick to take advantage of the then poorly informed investors and enthusiasts who were eager to embrace what they believed will be ‘the future’. Exit scamming was also facilitated by the lack of regulation and the developing crypto space. Contemporary investors are yet to find the best method of escaping this. A tradition, sad enough.
As the crypto space developed, the frequency of exit scams has seen a sharp decrease and ways of detecting the wolves have proven efficient…to an extent. The advent of DeFi, the sudden and uncontrolled proliferation of DeFi projects have further reduced the frequency of the traditional exit scams. Well, it probably has a new name… “Technical exploitation”
Recently, Polkadot-based enterprise and DeFi solution project – PAID network, suffered an ‘Exploit’. The perpetrators reportedly made away with millions of dollars worth of ethereum and other cryptocurrencies. Dodo DEX has also announced a minor exploitation of a bug in their code, losing over three million dollars in the accident. Majority of DeFi protocols have suffered similar ‘exploitations’ and each time, this is not traced back to the project teams. But exit scams have dropped in frequency…well, I don’t like coincidence!
The DeFi space marks a huge resemblance to the early crypto space. Emergence of new projects which are mostly a copy of already existing projects with just very little difference, Bogus promises, pump and dumps, naive and gullible investors, shady project teams and ‘get rich quick’ schemes.
Mainstream adoption of blockchain-based financial solutions have been limited due to these toxic features. Creating a new project has never been so easy, building a community around it is even easier, it would only take the DeFi tag and a ‘promising’ airdrop to get it done. Either way, this gives way for the exact scenario the earliest cryptocurrency boom created.
Are these projects really ‘technologically exploited’? or are we redefining ‘exit scam’? either way, I think it is a good development from the past. It is way more professional…lol. However, it doesn’t speak well of the ‘new rave’ in cryptocurrency and a concept which was dubbed to open up the crypto space to the world beyond it.
The ‘swaps’ with exact looking interfaces and functionalities, billions of dollars in incentives, tons of high-fee transactions; the DeFi space hasn’t really been the technological innovation it was thought to be, but this is least of the issues the crypto space has to suffer. Well, the ride has been a wild one and the exploitations are coming more frequently than unique developments. It’s exciting what becomes of this space, but the unexplained hazards deserve a more critical attention…if possible.