The Reason Behind the Failure of Many Decentralized Projects
Decentralization allows projects to offer a trustless environment to their users while reducing points of weakness at the same time. Especially because users will no longer have to trust a central authority as they can control and manage the project on their own.
As a result, there is no single point of failure, and the more members supporting the project, the more likely a project is to grow and flourish. However, it’s not all sunshine and rainbows as many of these projects do not live long enough to be called a success.
Some of them are not even fully decentralized. So the question is: why have so many decentralized projects failed in the past? Let’s find out.
- No signs of legitimacy and trustworthiness
In addition to having anonymous teams, these decentralized projects do very little to prove legitimacy and/or show signs of goodwill. Numerous project founders have been found guilty of stealing from their projects before running away without leaving a trace. This is why people feel unsafe being in projects with anonymous developers who can vanish in the blink of an eye. Sometimes, there may be no community supporting the project. Building and nurturing a community is vital for projects to raise awareness and keep investors happy.
2. Some DeFi (decentralized finance) platforms have no real utilities and are just money grabs
Extravagant marketing can hide the truth behind many faulty decentralized projects. Most of these projects have only one goal in mind and that is to pump their token’s price in an attempt to sell for a profit. This is further obvious when blockchain analysis shows that there are taxes implied on each buy/sell transaction made on a certain token. Unfortunately, pump & dump schemes are quite common in the world of DeFi.
And, it can become difficult to differentiate between tokens with real use cases and tokens facilitating pump and dump schemes.
3. Many decentralized projects are not fully decentralized
One of the perks of having your platform decentralized is its users’ sense of security because no third parties are interfering with how the platform is managed.
However, these platforms are not fully decentralized as they rely on centralized infrastructure such as:
- Centralized domain names such as .com, .net, and .org are indirectly controlled by the U.S Government. Verisign, a company responsible for managing the .com domain infrastructure, is under a contract with the U.S Government and has been reported shutting down sites frowned upon by the U.S feds.
- Perhaps the largest security concern is when decentralized applications rely on third-party storage providers to handle their users’ data. If the storage provider gets hacked, shut down, or goes bankrupt, the entire application might shut down due to data loss. Badger, a renowned DeFi platform, was hacked for $120 million because of an exploit found in Cloudfare’s API mechanisms.
- Relying on third-party wallets such as Metamask to store a project’s native tokens can also call for trouble as big tech companies can remove the Metamask extension at any given point.
Does a Fully Decentralized Application Really Exist?
Most decentralized applications use centralized infrastructure in one way or another, leading to various security problems in the long run and can be treated like a ticking time bomb.
Recently, a few fully decentralized projects have been in the works.
One example is Point Network — the world’s first fully decentralized platform that allows users to experience Web3.0: a new generation of the internet, which is free of censorship, mass surveillance, permissionless, open for everyone, and privacy-focused.
What is Point Network and How Does it Work?
Point Network is a collection of software tools used to improve access to the decentralized internet (Web3.0).
- Decentralized Storage: Perhaps the most severe vulnerability of Web2.0 is how big tech companies store and manage their users’ data. According to several reports, Google, Facebook, and other tech giants have been found guilty of selling their user’s private data. These malicious practices in addition to mass surveillance and censorship are no longer a thing thanks to Arweave’s decentralized peer-to-peer storage network, Point Network can store client data on the client-side itself instead of storing all of the data inside company-owned servers.
- Decentralized browser: Point browser is a Web3.0-enabled browser that provides access to only decentralized websites and content and at the same time disallows users from visiting legacy internet websites such as google.com, microsoft.com, and others.
The Point browser lets users create their own unique identity. A user with the handle @jack can automatically become the owner of his very own domain space at “https://jack.point". The ‘.point’ domain name is used for Point Network identities or in other words a Web3.0 website.
In addition to domain names, each user’s identity will be used for various other decentralized applications (dApps), such as decentralized social media, decentralized email, and public payment handles. By having an identity, users will automatically be authenticated on all web3 dApps. That means no more having to register accounts and remember a bunch of passwords for each application.
- Point Wallet: Point Wallet will be used to send and receive cryptocurrency assets while also providing transaction history. Since Point Network’s backend (Point Node) can connect to multiple chains (Ethereum, Solana, Polygon, etc.) simultaneously, Point Wallet users would potentially be able to interact with any cryptocurrency blockchain without leaving Point Browser, provided that a Point Wallet plugin for that chain exists.
Another benefit of having a multi-chain wallet is that it allows users to store, receive and send Bitcoin, Ethereum, Solana, and other tokens from the browser. Furthermore, Point Wallet’s key functionality lies in how it connects to dApps (decentralized exchanges, decentralized social media websites, NFT marketplaces, etc.) available on the Point Chain.
Although many decentralized projects have failed in the past, it is important to remember that the world of blockchain is still quite unfamiliar to most people.
As more successful projects begin to flourish, crypto enthusiasts will hopefully use them as an example while setting out to build platforms that can fully utilize the massive potential of decentralized architecture.