The past few decades have shown us, time and time again, that centralized financial systems are incredibly vulnerable. While held as pinnacles of security, a few certain events (detailed below) have shown us that this couldn’t be further from the truth.
Since 2008, we’ve seen individuals or corporations use the guise of centralism to pull off a fraud on huge scales. And, despite the public perception of the safety of this system, we’re currently approaching the third or fourth “once in a lifetime” economic disaster this decade.
Surely, something has to give.
Ponzi Schemes and Market Crashes
One of the first major turning points for centralized finance was Bernie Madoff’s Ponzi Scheme in 2008. Madoff was the chair of the Nasdaq and a leading pioneer in electronic trading. Over the course of around 17 years, he defrauded thousands of investors out of billions of dollars. Some reports demonstrate that the scam was even going on as early as the 1960s.
He attracted new clients by claiming to generate large returns for individual investors. He used a strategy that was known as a split-strike conversion, depositing all user funds into a singular bank account that he then paid out from. As the rocky circumstances surrounding the financial crash, cracks started to show, and he was unable to keep up with returns.
The actuality of the situation was that he simply collected all the user funds from across all of his partners, depositing them into a single account. From there,…
