Can Bitcoin, Ethereum or Dogecoin crack the GameStop puzzle? Crypto users ring the bell in ⋆ ZyCrypto
The debacle of the GameStop situation has recently sparked arguments for decentralized financial protocols (DeFi).
Proponents of DeFi protocols have said that the information asymmetry and censorship that caused investors to lose their investments would not have occurred on DeFi platforms.
Ethereum maximalist and founder of Mythos Capital, Ryan Adams, used Twitter to explain that the Ethereum-based DeFi platform Uniswap solves the GameStop problem. His position has sparked arguments as he claims that neither Bitcoin, Dogecoin, or the Binance cryptocurrency exchange can solve the problem.
What played out in the GameStop situation was that the company was released as the next big thing in a Reddit community, r / Wallstreetbets. Over the next several weeks, the company’s stock grew phenomenally as retail investors flocked to the market. Unknown at the time, a group of hedge funds had also placed short orders on the stock to bet on the company’s downfall. When the information leaked, retail investors stopped selling their acquired shares, causing the hedge funds to lose approximately $ 19 billion. This involvement resulted in centralized companies intervening on behalf of the hedge funds, ceasing trading in the stocks on major exchanges, and allowing the hedge funds to recoup some of their losses.
The current argument is that other than the Ethereum blockchain, which offers decentralized financial solutions, no other prominent blockchain, including Bitcoin, solves the problem of regulation, market manipulation and censorship.
Bitcoin proponents have opposed Adams’ stance on the issue. Alex Gladstein stated in response to the claim that while Bitcoin doesn’t actually “fix” the GameStop problem, it is wrong to say that Bitcoin can be stopped by any centralized agency or government. “Bitcoin doesn’t” fix “GME either, but it does offer an asset the government can’t stop trading,” he said in the tweet.
Adams took his argument further, stating that Bitcoin can be regulated if governments stop the flow of liquidity in cryptocurrency exchanges. “The government can stop Bitcoin trading by throttling liquidity on some exchanges. Uniswap on Ethereum is unstoppable. If you are a fan of democracy and civil liberties, why are you not a fan of DeFi? “
His argument seems to have loopholes, as governments can similarly “lock out” the liquidity of exchanges that offer Ethereum. Even in cases where this was attempted, such as in Nigeria, it became clear that traders were simply turning to using peer-to-peer trading to circumvent the ban.
In particular, DeFi offers a way to solve the GameStop problem, as a key feature of blockchains is the open ledger, where all transactions are recorded and are open for review. Any position in a market – both long and short – can be known in DeFi logs, resulting in less information asymmetry. Add to this the uncensible nature of decentralized blockchains and you have a powerful tool for combating manipulation by outside forces in the marketplace.