In hindsight, it’s tempting to tell ourselves that crypto’s problems began after the boom — after retail flooded in, after leverage, after influencers.
That story is comforting.
It’s also wrong.
The truth is simpler and less flattering:
crypto’s earliest years were a financial wild west, and many of the behaviors we now condemn were not accidents — they were formative.
By 2016, the mask came off.
The Myth of Innocence
Early crypto was sold as math replacing trust.
Code replacing institutions.
Immutability replacing discretion.
But long before regulation entered the picture, human incentives did — and they bent the system immediately.
The result wasn’t a clean rebellion against finance.
It was finance, stripped of guardrails.
Cryptsy and the Cost of Centralized Trust
By the time Cryptsy collapsed, many already suspected something was wrong.
Funds disappeared.
Withdrawals stalled.
Excuses multiplied.
When the dust settled, it became clear that Paul Vernon (“Big Vern”) had either lost or stolen millions in customer assets. He fled. Court proceedings followed. Years later, victims were still untangling the wreckage.
The lesson was blunt:
You could build decentralized money — and still lose everything to a single trusted intermediary.
“Not your keys, not your coins” wasn’t philosophy.
It was a survival rule.
Wolong and the Open Secret of Market Manipulation
If Cryptsy exposed custodial risk, Wolong exposed something worse:
how easy it was to manipulate markets without breaking anything.
In 2014, Wolong published a PDF detailing Dogecoin price manipulation strategies — not as a confession, but as instruction.
It laid out:
order book controlsocial signalingcoordinated buying and sellingcrowd psychology
There was no hack.
No exploit.
Just incentives, visibility, and volume.
By 2016, these tactics weren’t fringe. They were everywhere — simply rebranded as “signals,” “alpha,” or “private groups.”
The uncomfortable truth:
Crypto didn’t eliminate market manipulation — it industrialized it.
Ethereum, The DAO, and the Limits of “Code Is Law”
Nothing symbolized crypto’s ideological crisis more than The DAO hack.
In June 2016, a flaw in a smart contract allowed roughly $60 million worth of ETH to be drained — legally, according to the code.
The response split the community.
Ethereum chose to hard fork the chain to reverse the theft.
Ethereum Classic refused, preserving the original ledger.
For the first time, crypto confronted a contradiction it could no longer ignore:
Immutability was not absolute. It was a social choice.
The rollback didn’t just save funds.
It redefined governance — and quietly admitted that humans still sit above the protocol.
ICOs: The Best and Worst Idea Crypto Ever Had
By 2016, another transformation was underway — quieter than The DAO, but just as consequential.
Initial Coin Offerings (ICOs) were no longer experiments.
They were becoming normal.
This matters.
Why ICOs Were Good
ICOs did something traditional finance never had:
They democratized early-stage fundingThey let small teams compete with well-capitalized incumbentsThey removed gatekeepers almost overnightThey accelerated experimentation at a global scale
For the first time, developers didn’t need:
venture capital approvalgeographic proximityinstitutional credibility
They needed a whitepaper, a wallet address, and a narrative.
This openness fueled real innovation — some of which still underpins crypto today.
Why ICOs Were Bad
That same openness removed every protection at once.
By 2016:
there were no disclosure standardsno investor protectionsno meaningful accountabilityno clarity on what buyers were even purchasing
Whitepapers replaced business plans.
Tokens replaced equity.
Speculation replaced evaluation.
And critically:
The DAO didn’t scare people away from ICOs — it reassured them.
The lesson many absorbed wasn’t “this is dangerous.”
It was “even if things go wrong, the community will intervene.”
That belief didn’t slow the ICO model.
It legitimized it.
Stablecoins: Liquidity Without Transparency
While ideology and funding models evolved, USDT (Tether) quietly solved a practical problem: liquidity.
Launched in 2014, Tether promised dollar parity without banking friction. By 2016, it was already deeply entangled with exchanges — especially Bitfinex.
What it didn’t provide was transparency.
No real-time auditsOpaque reservesSystemic importance without systemic oversight
Stablecoins didn’t break crypto — they enabled it to scale.
And in doing so, they introduced a new fragility:
Trust concentrated precisely where visibility was weakest.
Ripple and the Premine Question
Ripple never pretended to be cypherpunk.
From the start, XRP was:
pre-minedcentrally influencedpitched to banks, not anarchists
By 2016, Ripple represented a different fork in crypto’s evolution — one aligned with institutions, not rebellion.
The controversy wasn’t that Ripple existed.
It was that crypto never agreed on what decentralization actually meant.
Was it code distribution?
Token ownership?
Governance?
Narrative?
The answer, inconveniently, was “sometimes.”
2016: The Year Crypto Grew Up (Whether It Wanted To or Not)
By the end of 2016, the illusions were gone.
Exchanges could steal or failMarkets could be manipulated openly“Immutable” ledgers could be rewrittenLiquidity could be syntheticDecentralization could be selective
None of this killed crypto.
What it killed was innocence.
The Lesson We Keep Relearning
Blockchains don’t remove trust.
They relocate it.
They don’t eliminate power.
They restructure it.
And they don’t save us from ourselves.
The wild west didn’t end because it was outlawed.
It ended because people learned what guns, gold, and unchecked incentives actually do.
Crypto is still learning that lesson.
And every cycle that forgets 2016 pays for it again.
Crypto, the Early Years (2012–2016): The Financial Wild West was originally published in Coinmonks on Medium, where people are continuing the conversation by highlighting and responding to this story.