Looking back, it’s tempting to tell ourselves that this is where the problems with cryptocurrencies began. ~ after Boom — post-retail flood, post-leverage, post-influencer.
That story is comforting.
That is also wrong.
The truth is simpler and less glamorous.
The early days of cryptocurrency were the financial Wild West, and many of the actions we condemn today were formative, not accidental.
In 2016, the mask came off.
myth of innocence
Early cryptocurrencies were sold as a math replacement for trust.
Code Substitution Authority.
Immutability replaces discretion.
But long before regulation began, Human incentives were like that. — and they immediately bent the system.
The result was not a complete revolt against finance.
It was finance that removed the guardrails.
The Cost of Encryption and Centralized Trust
When Cryptsy collapsed, many people already suspected something was wrong.
The funds are gone.
Withdrawal has been stopped.
The excuses increased.
Once the dust settled, it became clear. Paul Vernon (“Big Bern”) Millions of dollars in customer assets were lost or stolen. He ran away. Court proceedings followed. Years later, victims were still unpacking the wreckage.
The lesson was blunt.
Even if you build a decentralized currency, you still risk losing everything to a single trusted intermediary.
“Not a key, not a coin” was not a philosophy.
It was the law of survival.
The Open Secret of Wollongong and Market Manipulation
If Cryptsy exposed management risks, WollongSomething worse has been exposed.
How Easy It Was to Manipulate the Market nothing breaks.
In 2014, Wolong published a PDF detailing his Dogecoin price manipulation strategy as a guide rather than a confession.
It is organized as follows:
- Order management
- social signals
- Group purchasing and selling
- crowd psychology
There was no hacking.
No exploits.
All you need is incentive, visibility and volume.
In 2016, these tactics were not fringe. They were everywhere — simply rebranded as: “Signal”, “Alpha”, or “Private Group”.
Inconvenient Truth:
Cryptocurrencies have not eliminated market manipulation, they have industrialized it.
Ethereum, DAO, and the limitations of “code is law”
Nothing better symbolizes the ideological crisis of cryptocurrencies. DAO hack .
In June 2016, a flaw in a smart contract led to the leakage of approximately $60 million worth of ETH. legallyAccording to the code.
The response divided the community.
Ethereum chose hard forkChain to prevent theft.
Ethereum Classic refused, preserving the original ledger.
For the first time, cryptocurrencies face a contradiction that can no longer be ignored.
Immutability was not absolute. It was a social choice.
Rollbacks don’t just save money.
Governance was redefined and quietly acknowledged. Humans still sit on protocols .
ICO: The best and worst ideas in cryptocurrency history
2016 saw another, quieter but consequential change taking place than The DAO.
ICO (Initial Coin Offering)It was no longer an experiment.
they were becoming normal.
This is important.
Why ICOs are good
ICOs have accomplished what traditional finance has never been able to accomplish.
- them Democratizing early-stage financing
- It allows small teams to compete with well-capitalized incumbents.
- They got rid of the gatekeepers almost overnight
- They have accelerated experimentation on a global scale.
For the first time, developers didn’t need:
- Venture capital approval
- geographical proximity
- institutional credibility
We needed a white paper, a wallet address, and a narrative.
This openness fostered true innovation, some of which still underpins cryptocurrencies today.
Why ICOs are bad
The same openness has been removed. All protection at the same time .
Until 2016:
- There were no disclosure standards.
- No investor protection
- no meaningful responsibility
- It’s not clear what the buyer bought
White papers replaced business plans.
Tokens have replaced assets.
Guessing replaced evaluation.
And crucially:
DAO reassured people not to be afraid of ICOs.
That was not the lesson many people absorbed. “This is dangerous.”
that “Even if things go wrong, the community will step in.”
That belief hasn’t slowed down the ICO model.
That made it legal.
Stablecoins: Liquidity without Transparency
While ideologies and funding models evolve, USDT (Tether)We quietly solved the practical problem of liquidity.
Launched in 2014, Tether promised dollar parity without banking friction. In 2016, it was already deeply intertwined with exchanges, especially Bitfinex.
What it failed to provide was transparency.
- No real-time auditing
- unclear reserves
- Systemic importance without systematic oversight
Stablecoins didn’t break cryptocurrencies, they just allowed them to scale.
And in doing so, they introduced new vulnerabilities.
Trust is focused precisely where visibility is weakest.
Ripple and pre-mining questions
Ripple has never pretended to be a cypherpunk.
From the beginning, XRP has been:
- pre-mined
- centrally influenced
- Threw it to the bank, not to the anarchists.
By 2016, Ripple represented another turning point in cryptocurrency evolution. In other words, it was a watershed moment consistent with agency, not rebellion.
The controversy was not that Ripple existed.
That was it Cryptocurrencies have never agreed on what decentralization actually means..
Was it code distribution?
Token ownership?
rule?
story?
The answer was uncomfortable.“sometimes.”
2016: The Year Cryptocurrency Grew (Whether We Like It or Not)
By the end of 2016, that illusion was gone.
- Exchanges can be stolen or fail.
- Markets can be openly manipulated
- “Immutable” ledgers can be rewritten
- Liquidity can be synthetic
- Decentralization can be optional.
None of this killed cryptocurrency.
What it killed was innocent.
Lessons we relearn over and over again
Blockchain does not eliminate trust.
them relocate.
They do not remove power.
them reconstruct it.
And they don’t save us from ourselves.
The Wild West didn’t end because it was outlawed.
It’s over because people learned what guns, gold, and unchecked incentives really do.
Crypto is still learning its lessons.
And every cycle of forgetting 2016 will pay the price again.
Crypto, the Early Years (2012-2016): Financial Wild West was originally published on Coinmonks on Medium, where people are continuing the conversation by highlighting and responding to these stories.