Earlier this month, the mainstream media sent ripples across the blockchain community when they reported the arrest of Divyesh Darji. Allegedly the key leader of BitConnect, Darji gained notoriety, first as a charismatic salesman, and later, as a fleeing conman. Although his arrest is a victory, it provokes questions about decentralization.
Unless you’ve been living under a rock over the past year, you’re familiar with BitConnect. Proclaimed as an interest-bearing cryptocurrency asset, BitConnect lured investors with extremely high payout rates. Depending upon how much you were willing to put down, the platform promised up to 60% monthly interest. Of course, the numbers didn’t add up.
At such a rate, any paying institution would quickly go bankrupt. To keep the scheme running, the entity must recruit additional members to pay off the original investors. Rather than a new banking paradigm, BitConnect turned out to be a crypto fraud.
Unfortunately, the allure of the blockchain and decentralization means that additional charlatans will take over from BitConnect’s ashes. But for now, Darji’s arrest is justice served.
I don’t know anybody who doesn’t want to see Darji or any other BitConnect conman behind bars. But can we take the best of decentralization protocols, and yet avoid any of its consequences?
Darji Pitchforks Represent Decentralization Hypocrisy
Let me state clearly: I believe anybody that defrauds their fellow man must pay the consequences. I don’t care about the platform. A crypto fraud has the same impact as “regular” fraud to the victim.
At the same time, I hear so many arguments forwarded about the joys of decentralization. If cryptocurrencies go mainstream, for instance, this would usher in a new era of trust and transparency.
Will it? I’m not 100% sure. Under the traditional markets, financial regulators and government agencies deploy measures such as the “plunge protection team.” On paper, this is essentially meant to protect retail investors from themselves.
Cryptocurrencies represent a dichotomous alternative. Rather than the government babysitting you, you take full responsibility for your actions. That’s why the crypto markets are so volatile – decentralization requires that the entire trading mechanism runs freely, without oversight.
But if we value decentralization so much, we can’t then resort to law enforcement, the centralized authority’s key component. In other words, if somebody defrauds us in the blockchain, we should also have the responsibility of taking care of business ourselves.
In this case, Darji operated under a pure decentralization scheme. He made promises. It was your job to make sure they were legitimate.