Defi Manual: Part 4 — Market Manipulation
Here is part 4 of the Defi Manual. You can reference part 1 here, part 2 here, and part 3 here.
Both Cefi and Defi will face market manipulation of some kinds.
Inflation manipulation in Cefi
Inflation is when the devaluation of an existing currency supply through additional more supply and sacrifice purchasing power of a currency.
The central bank in the Cefi system uses its power to control inflation to 2% as their preferable target. However, 2% is a myth after all since 1% of the rich controlled more money than the bottom 50% did and their incomes rose faster than the bottom 50% did too. 2% may work for the rich but not the bottom 50% as lumber prices in April 2021 increased 250% since last year while the central bank was working to contain inflation within 2%.
While the central bank may find a way to print more money out of the trouble in the short term, people are looking for solutions in cryptocurrency like Bitcoin, which capped the supply to prevent the devaluation of its valuation. Ethereum also modified its supply by burning its quantity faster than the supply and creating a deflationary environment to prevent its devaluation.
Network manipulation in Defi
