GameStop is a defining moment for DeFi!!
A subreddit with millions of traders learned the value of censorship resistance firsthand last week. This lesson is based on the controversy around coordinated price pumps of video game retailer GameStop (GME) and the ensuing chaos it spawned on some trading platforms.
Pitchforks in the streets
What happened: the price of GME skyrocketed as small traders from r/WallStreetBets pumped the gaming retailer’s stock to a market cap of almost $28 billion. The result was a flawlessly executed short squeeze that cost hedge funds billions.
Amidst the frenzy, Robinhood, an app long known as a crypto-friendly place to trade, tossed GameSpot buyers (and its reputation) onto the fire by appearing to cave to pressure from mainstream financial firms by choking off its customers’ ability to buy more GME shares. Other reports indicate that Robinhood simply didn’t have enough cash to handle the massive volume of transactions.
Whatever the case may be, the story is the perfect advert for DeFi because it emphasized two things: 1) the legacy financial system is broken. 2) trusting centralized services comes with risks. Those in power are capable of delisting assets, blocking trades, and stealing profits. They can cheat, print money, and conspire with near impunity.
The debacle also exposed the hypocrisy of wall street. Listening to professional traders complain about internet mobs banding together to intensify their losses certainly made for good entertainment. But schadenfreude aside, the incident was an important validation for the theory of decentralized financial applications — indeed, it was perhaps its biggest endorsement yet.
The birth of a new world
The power dynamics are shifting on Wall Street, and for once, individual investors are winning. The GameStop saga showed us the potential of cooperative decentralized groups. It also showed us that the future of finance may look less like Wall Street and more like the internet, powered by the decentralized masses.
Following the incident, the DeFi market soared despite stagnation in the price of bitcoin for most of the week. While this might be a golden moment for DeFi, Ethereum and many of the dApps that rely on it are not ready to onboard every disgruntled Robinhood user. The DeFi user experience is far from a finished product. Things are still clunky and disorganized. And there remains a big knowledge gap between DeFi and the average person. Not to mention the gas fees, which are a significant barrier for newer and smaller traders. We know this, and in part, it’s why we started Glitch.Finance.
Building the future
We’re building the GLITCH protocol to meet crypto’s urgent need for a scalable blockchain operating software (OS). This is a new breed of OS that improves upon the best of existing blockchains in an effort to unite the entire ecosystem of dApps.
GLITCH is built specifically for DeFi and will help to enable millions of users to access dApps without compromising the quality of its user experience. The GLITCH protocol aims to take some of the load off Ethereum by offering high transaction throughput, near-zero transaction fees, and a revenue-sharing model that rewards network supporters, dApp developers, and end-users.
Ultimately, we intend to help accelerate the progress being made on scaling and develop the technology needed to launch and support large-scale applications. We’re working so that when the next GameStop-Robinhood scenario arrives, there will be more and better alternatives available. We hope you’ll join us.
Learn More
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