In a surprising twist, it’s not the crypto participants but Wall Street giants who are now championing decentralization, transparency, and immutability.
Crypto’s Founding Principles Are Being Kept Alive—By Institutions
The world is wrestling with Trump’s on-and-off tariffs and their attendant side effects, such as retaliatory tariffs, whipsawing markets, and what appears to be trouble in the U.S.’s sovereign bond market. The speed with which this is all happening is dizzying, and makes commenting on it feel futile. A day later, the world can look very different
So instead, I’m going to write about a slower-moving trend I’ve noticed the past couple of months: As large swaths of crypto increasingly come to resemble Sodom and Gomorrah, traditional financial institutions are embracing crypto, and it seems for the right reasons.
Traditional finance institutions, historically cautious or even dismissive of crypto, are championing foundational crypto ideals—decentralization, transparency, and immutability—while many newer crypto enthusiasts, those entering post-2020, have largely abandoned these very principles in favor of pure speculation and profit-driven motives.
Institutional figureheads now regularly extol crypto’s revolutionary qualities. They stress the benefits of decentralization to improve security, transparency to foster trust, and immutability to protect against fraud. This rhetoric aligns them closer to the OG crypto userbase than today’s typical crypto participant.
Take for example Blackrock’s Head of Digital Assets Robbie Mitchnick, who recently said at the Digital Asset Summit about why Blackrock started with Ethereum for BUIDL, a tokenized money market fund.
There was no question that the blockchain we would start our tokenization on would be Ethereum and that’s not just a Blackrock thing. That’s the natural default answer. That’s really important… Clients have clearly made the choice that they really do value decentralization, credibility, and security. And that is a great advantage that Ethereum continues to have.
Conversely, it seems to me that most recent crypto entrants are defined primarily by their skepticism and speculative appetite. A kind of crypto nihilism. There are of course many reasons for this, but one certainly comes from a string of failures, or perceived failures, within the crypto industry. Setting aside the world-class fraudsters like SBF, Richard Heart, and Do Kwon, even good decentralized projects have had troubles.
Ethereum is probably the most well-known one. In 2016, a vulnerability in The DAO, an early decentralized investment fund, allowed an attacker to drain around $60 million worth of ETH. In response, the Ethereum community, led by Vitalik Buterin, voted to execute a controversial hard fork to reverse the hack and return the funds. Essentially, they rolled back the chain, immutability be damned.
Many other decentralized projects have struggled to deliver on their decentralization promises. MakerDAO’s decentralized DAI stablecoin became largely backed by centralized stablecoins after the March 2020 market puke, undermining its claims to censorship resistance. Layer-2 solutions often function as glorified multi-signature wallets, where a handful of individuals retain control. Solana’s repeated network halts and manual restarts have challenged the credibility of its decentralization claims. More recently, Hyperliquid delisted a token at a price far below the current market price after an attacker attempted to exploit an illiquid market on the exchange. All of this ostensibly makes it seem like crypto boasts of decentralization while in reality not caring about it.
This shift in crypto culture is also massively influenced by broader shifts in sentiment. Faced with economic disenchantment, widespread institutional mistrust, and deep financial insecurity, young people increasingly see stock trading, real estate, and crypto as a means to escape what appears to be a rigged system. From this perspective, foundational crypto ideals such as immutability can seem naïve or even irrelevant.
On the other hand, traditional financial institutions entering crypto come from a completely different vantage point. First of all, they don’t have a get-rich-quick attitude–they’re already filthy rich. They are looking for and investing in crypto projects that will be value-creating, not extractive.
Second, they’ve got a low time preference, meaning they measure investments in years and decades. On that timescale you can see crypto is real innovation promising substantial practical benefits. They don’t get frustrated by the seeming lack of progress in the past couple of years, because they can see the tremendous progress made in 16 years.
Third, these institutions are more pragmatic. They understand that decentralization can take time to achieve, look at the decentralization progress of Ethereum since the hard fork, Solana’s much improved validator set, and the fact that Hyperliquid is already more transparent than any centralized exchange.
Thus institutions now sound more enthusiastic about the technology than most people on Crypto Twitter (CT). This doesn’t mean I’m an advocate for institutions in crypto, because I’m very wary of them. Nor does this mean I immediately believe what the Larry Finks of finance say about crypto. Who knows if they actually believe what they’re saying, but at the very least I’m glad that some important camp within crypto is still championing crypto virtues.
Read the full article here
