Placeholder Ventures, in their 2017 investment thesis proclaimed that cryptonetworks are less like companies and more like small emerging economies. From their view, the fundamental parts of any cryptonetwork can be translated into a real-world equivalent. For example, a consensus protocol can be seen as the constitution, the tokenomics are the monetary policy, and the network’s community of participants and users can be viewed as the citizens. A massive investment boom took place in 2017 due to the belief by investors around the world that the breadth of the possibilities of these new decentralized cryptonetworks were endless.
While the decentralized products and services have yet to gain significant traction, the token trading and trading related services have continued to steadily grow and currently account for almost all of the activity in the cryptonetwork economies. While it may not be obvious, there is also a system that provides stability for the token market similar to how central banks in the real economy provide stability to the financial markets. This crypto central banking system is not officially sanctioned but rather it is a system that has been gradually built as the crypto financial ecosystem grew larger.
Crypto is obviously known for its aversion to centralized systems, so why does crypto even need a central banking system? While crypto assets are a disruptive concept in a space that has had little innovation for the last 400 years, it is still a form of a currency. There is one characteristic that has afflicted every currency that has ever existed, which is that the inherent boom and bust cycles have ultimately led to either devaluation or destruction. Central banks were originally created solely to help prevent these highly destructive financial crises and ensure stability although they have evolved into a much more comprehensive role in present day. The arguments made in this series are referring to the central banking system that acted in support of the financial system.
The current crypto central banking system is a decentralized structure made up of three components: cryptoeconomics, US dollar-backed stablecoins and large exchanges. The three parts collectively manage the cryptonetwork equivalent of monetary policy, fx intervention, fx reserves, liquidity management, lender of last resort, banking/account management services, settlement systems, and development functions; all functions critical to a well-functioning financial system.
 Burniske, Chris and Joel Monegro. (2017 September) “Placeholder Thesis Summary, ” https://ipfs.io/ipfs/QmZL4eT1gxnE168Pmw3KyejW6fUfMNzMgeKMgcWJUfYGRj/.
 Dalio, Ray. (2017) How the Economic Machine Works.