Motivation
In this article, I want to share my opinion on how far cryptocurrencies are from being widely accepted by the financial sector and business in general. And also about things that prevent this
A few days ago, there was another incident in the crypto industry involving a user losing over $25 million worth of cryptocurrency. Our news portal was one of the first to report on this.
Note: I will touch upon the news industry and the crypto expert community. There is no negativity or attempt to score points. I aim to show that a superficial approach without delving into the essence leads to misinformed public opinion and, consequently, negative attitudes toward the cryptocurrency sector as a whole.
In the context of events and this article, I will present just one argument in favor of the traditional banking system and other centralized organizations, which shatters the dreams of maximalists regarding the adoption of cryptocurrencies in the real economy. Unfortunately, I believe no one can currently counter my words with logical arguments.
One-sided News Coverage
So, in the published call from @qklpjeth, there were no details. Analyzing his transactions made it clear that he sent a significant amount of tokens via a direct transfer using the transfer function to the wrong address. This news is already being framed as a user error by influencers and Media.
I myself published a news piece about this on November 11, noting that the user most likely copied the wrong contract address. However, I emphasized in the article that this situation arises due to the widespread design of contracts, particularly the ERC-20 standard. So far, I have not come across any news outlet that has highlighted this issue beyond an emotional story of a large sum being lost. This is despite the fact that the creator of ERC-20 himself refuses to use it.
Of course, the user bears responsibility for the copying error. At the very least, every cryptocurrency user should understand their responsibility and have basic knowledge of blockchain operations. However, given the issues with the functioning of ERC-20 and related contracts, this is not merely a user error but a complex problem that has required a solution for over 10 years.
Moreover, we know of many attempts to address this issue, some of which are discussed on Medium or Reddit. Yet no news outlet has touched on the technical aspects or sought comments from truly competent security engineers and smart contract developers.
As a result, we have one-sided coverage, leading to the conclusion that cryptocurrencies are complex and unsafe.
Incompetence in Specific Issues of Declared Experts
What surprised me further was the selection of the expert community. For example, Cointelegraph reported that DefiLlama developer 0xngmi supposedly advised qklpjeth to contact Renzo directly to reissue the ezETH contract. This would be strange coming from a developer, as every developer understands the consequences of such a step. In reality, the Cointelegraph article misrepresented 0xngmi's words.
For some reason, the author of the news piece ignored another developer commenting on the help post. I am referring to Dexaran. Although his comments add context and are somewhat provocative, which suits the media well.
Cointelegraph's invited expert Harrison Seletsky made general comments about the need to improve UX. Seletsky said that the incident is a wake-up call for the industry, but this bell has been ringing for years. He also added that given such potential errors, users would choose centralized organizations. This is logical; businesses will not use a financial system where simple mistakes can lead to massive losses or even complete loss of assets.
You could say he talked about everything and nothing at the same time.
Benzinga's assessment seemed even more detached from reality to me. They stated they contacted qklpjeth, who reportedly told them, "staking on CEX feels more secure."
Source: Benzinga.
However, no CEX offers the same level of returns as DeFi protocols. Moreover, any CEX cannot prevent a user from sending funds to an incorrect address when withdrawing funds.
The invited experts, as in the first case, could not offer anything concrete. Furthermore, the suggestion to implement 2FA for transfer confirmations clearly shows that the selected experts do not even understand the core issue, which lies in smart contract design.
The Problem of Cryptocurrency Adoption by Real Sectors of the Economy
At the beginning of the article, I said that I have one argument in favor of the traditional financial system for the real economy.
Some may not fully understand this, but public blockchain systems are decentralized backend systems for transactional applications, the majority of which are financial applications. Have you ever seen application developers in traditional finance leave a well-known vulnerability unresolved for years?
Moreover, the traditional banking system allows for transaction reversals. Sometimes it's challenging, but it's possible. For example, here is a story from a former employee of a scam company, stating that US citizens have high financial literacy and can easily reverse their transfers.
Will businesses use a financial system that presents major problems with trivial mistakes or one where they can retrieve their funds? The answer is obvious.
Additionally, as consumers of products from large companies, we must understand that the costs of using the expensive traditional financial system are already factored into product prices, which we ultimately pay. So, we cannot rely on capital's frugality to minimize its costs.
Private blockchain systems closely resemble traditional mechanisms like SWIFT, so there is no point discussing them, especially since we, ordinary citizens, are excluded from their functions and cannot interact with them like we can with public blockchains.
Conclusion
A problem identified and thoroughly described by Dexaran back in 2017 continues to plague EVM networks to this day. Practically all fungible tokens in EVM networks are copies of ERC-20, meaning we have a vulnerability the size of the Grand Canyon.
EIP editors claim that it is not a system problem but an issue of users' attention, who use the system at their own risk.
What does the media do with all this? They choose the aspect of the event with the most emotional impact, inviting experts unrelated to the discussed topic. This is exactly what I criticize when I say that the media approaches the matter superficially and one-sidedly. It harms the industry and does not help us progress.
If you want to read more about the ERC-20 issue and how it has been inadequately covered for 7 years, read Dexaran's Medium article.
Sources
- Loss of $26M or Silencing a Problem Worth Hundreds of Millions Coinmonks
- ERC-20 Issues Ethereum.org
- ERC-20 Live Losses Calculator Github Dexaran
- ERC-223 official documentation published on Ethereum:
- ERC-223 Hub Page:
- Website Dex223 (ERC-223 DEX)
- Telegram DEX223
- X ERC223 account on X
- Youtube: https://www.youtube.com/@erc223
- Reddit Reddit Dex223
- Medium: Dexaran