The $ 1 billion cryptocurrency space is no stranger to the hype as it is seen as a factor pushing up cryptocurrency prices. Although this may be the case, the hype generated by large centralized cryptocurrency exchanges can actually do more harm than good to users involved in some community-based projects.
For example, the flagship project of the Web3 Foundation, Polkadot, aims to enable a decentralized network in which users control applications, services, and organizations rather than Internet monopolies. The project was launched in 2017 by some of the leading names in the blockchain industry, including Ethereum co-founder Gavin Wood.
On July 26, Wood published a Polkadot Blog post which found that the first vote had taken place on the Polkadot Network to determine the ultimate “meaning” of the DOT token for Bulcadot. DOT code is used for management, storage and connectivity in the Polkadot network. After a two-week vote, the community decided that the “change” to the DOT token should take place on August 21.
Switching is a tactic similar to stock splitting in traditional stock markets. In this case, all DOT tokens exchanged for 100 new DOT tokens will have a ratio of 1: 100. According to Gavin’s contribution, this step “will result in a more comfortable DOT value”.
While the DOT switch is clearly explained, some leading central exchanges such as Binance and Kraken listed Polkadot’s DOT token on August 18, three days before the agreed switch.
Binance did not return a call for comment from Cointelegraph, while Kraken declined to comment on the situation.
Confusion puts society at risk
Shortly after Binance and Kraken listed the DOT code, Wood released a series of tweets expressing concern about society as a result of the reckless acts of the exchange.
As Wood noted, the actions taken by exchanges have put society at risk. While at CryptoTwitter, confusion became apparent between traders, speculators, and community members. A post on the Imgur online photo-sharing platform shows how the DOT price instantly rose 10 times higher than the set value within the first hour of trading.
The new DOT price
Because of the DOT change period, uniformed community members who thought they were buying DOT tokens at a very low price bought them at a much higher price. This becomes evident on August 21, the day of Bolcadot’s confession.
Protect society in the future
Meanwhile, the Polkadot community has taken various measures to warn users against purchasing the DOT tokens currently listed on Binance and Kraken. For example, on August 18, the Web3 Foundation sent an email to Polkadot members explaining the Department of Transportation’s name and how it would be transferred. The email also states:
“Unfortunately, some unscrupulous exchanges have chosen to switch to August 18 instead of August 21, the naming day the Polkadot community agreed on.”
The email also indicated that the actions taken by Binance and Kraken were “irresponsible” and “misleading” and not only put Polkadot’s stakeholders at risk, but also exposed themselves to liability.
While Kraken chose not to discuss the matter directly with Cointelegraph, Kraken co-founder and CEO, Jesse Powell, posted a tweet on August 18 sharing his thoughts on the matter:
Not the first time
Whatever the situation between the Polkadot community and the exchanges, according to some commentators, this position highlights a bigger point: Large cryptocurrency exchanges can be detrimental to community-based enterprises.
Matti Greenspan, cryptocurrency market analyst and founder of market analysis platform Quantum Economics, told Cointelegraph that he was not surprised by the actions taken by Kraken and Binance. “Exchanges and brokers are ultimately companies and they are forced to do what is more profitable. This is not a unique crypto problem either,” he said. Greenspan explained that if the decentralized network is to proceed, it does not require the use of a single central exchange that must continue.