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Omid Malekan sharply critiques the crypto industry for prioritizing fundraising and profit over true decentralization, warning this undermines long-term project success.
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He highlights pervasive market manipulation tactics like pump-and-dump schemes and inflated metrics that mislead investors about project viability.
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Malekan expresses skepticism about the proliferation of new Layer 1 and Layer 2 blockchains, suggesting innovations could be better integrated into existing networks.
Crypto expert Omid Malekan warns that fundraising focus and market manipulation threaten decentralization and long-term success amid a $4 trillion crypto market surge.
Omid Malekan’s Critical Analysis on Crypto Fundraising and Decentralization Challenges
In a recent detailed commentary on X (formerly Twitter), Omid Malekan, adjunct professor at Columbia Business School, delivered a pointed critique of the crypto industry’s current trajectory. He argues that many projects prioritize rapid fundraising and profit extraction over the foundational principle of decentralization, which is essential for sustainable growth and innovation.
Malekan underscores a troubling trend where large capital raises often distract teams from their original decentralized vision. He points out that projects with massive fundraising rounds frequently fail to deliver meaningful progress, contrasting them with pioneers like Bitcoin and Ethereum, which raised little or no capital yet achieved lasting impact.
“Funds raised are negatively correlated with long-term success. The data is indisputable,” Malekan states, emphasizing that projects raising hundreds of millions or billions often accomplish little in return. This observation challenges the prevailing notion that more funding inherently leads to better outcomes in crypto development.
Market Manipulation and Its Impact on Investor Trust
Malekan also draws attention to the widespread issue of market manipulation within the crypto ecosystem. He highlights practices such as pump-and-dump schemes, artificially inflated total value locked (TVL) figures, and dubious staking mechanisms that distort the true health of projects.
These tactics not only mislead investors but also erode trust in the market’s integrity. Malekan warns that many participants in the crypto space are either directly involved in or closely connected to coordinated schemes designed to inflate token prices temporarily, only to profit at the expense of less-informed investors.
His candid remarks serve as a call for increased transparency and vigilance among market participants to safeguard the ecosystem’s credibility.
Skepticism Toward New Layer 1 and Layer 2 Blockchain Projects
Addressing the rapid emergence of new Layer 1 (L1) and Layer 2 (L2) blockchain solutions, Malekan expresses skepticism about their necessity. He argues that many innovations touted by new projects could be integrated into existing, well-established chains, reducing fragmentation and enhancing interoperability.
According to Malekan, the motivation behind choosing specific L1 or L2 platforms often stems from financial incentives rather than genuine technological preference. He states, “The most likely reason a new project picks a specific L1 or L2 is because they were paid to. It’s not ‘because they like the tech.’”
This perspective challenges the proliferation of blockchains and encourages stakeholders to critically evaluate the true value and innovation each new entrant brings to the ecosystem.
Concerns Over Permissioned Blockchains and Industry Practices
Malekan further critiques the rise of permissioned blockchains, labeling them as “innovation theater” that ultimately hinder the adoption of truly public and decentralized networks. He suggests that such models dilute the core ethos of blockchain technology by reintroducing centralized control under the guise of innovation.
His pointed criticism extends to specific DeFi protocols like Ondo Finance, which he describes as operating in a “shady” manner, highlighting ongoing concerns about governance and regulatory compliance within the space.
Community Reactions and Calls for Sensible Regulation
The professor’s insights have sparked robust discussion within the crypto community. Several industry leaders have publicly agreed with Malekan’s concerns, emphasizing the prevalence of scams and the urgent need for sensible regulation to foster a healthier environment.
One notable response came from MetaLawMan, who stated, “There are a lot of scams and scammy behavior in crypto. That’s why most of us have been calling for sensible regulation of the space. Because we want to see the technology thrive.”
Such endorsements highlight a growing consensus that regulatory clarity and ethical standards are essential for the crypto industry’s maturation and long-term success.
Conclusion
As the crypto market approaches a historic $4 trillion valuation, Omid Malekan’s critique serves as a crucial reminder of the challenges that lie beneath the surface of this bullish momentum. His analysis urges stakeholders to prioritize decentralization, transparency, and genuine innovation over short-term fundraising gains and market hype.
Addressing these concerns will be vital for maintaining investor confidence and realizing the promise of a decentralized financial future. The industry’s ability to self-correct and embrace responsible practices will determine its trajectory in the years ahead.
