• Scott Duke Kominers


December 7, 2022, Opinion: "In the past year, crypto markets dropped from $2.9 trillion in value to around $800 billion. In the wake of the collapse, crypto lenders and exchanges have been accused of fraud and other wrongdoing. What went wrong? One factor is competition. In theory, competition should always benefit consumers. But in some situations, as competition intensifies, companies hide underlying costs and risks in order to offer attractive products and win customers. Because it’s so easy to move assets in crypto, competition incentivized this practice, and a lack of transparency in centralized crypto finance allowed unproductive companies to thrive by offering products that appeared attractive in the short run but were unsustainable in the long run. Unfortunately, these companies amassed significant assets before their business models eventually unraveled. This problem hasn’t affected all crypto markets, however: decentralized exchanges, which have more transparency, have held up while centralized exchanges have flamed out. Though generally smaller and less advanced than centralized exchanges, these decentralized protocols may offer a way forward for crypto markets."