Bitcoin, Ethereum and Litecoin; are some of the biggest cryptocurrencies on the market, with their main selling point being decentralization, but are they really decentralized?
Over the years, DeFi, or Decentralized Finance currencies, have become very popular, but I would disagree with the fundamental definition. DeFi is most commonly referred to as projects based on the ERC20 protocol; however, this can create a misleading title. My definition would consider any monetary currency that is decentralized to be DeFi (it just makes sense!)
- It is too hard for the average user to support the network
- It’s expensive and time consuming for decentralization
- The alternatives slow down the blockchain
Ethereum has far more transparency — Richard Quest
Ethereum 2.0, or “Serenity” has an excellent reason for an update. Proof Of Work will sooner or later make severe impacts on our already degrading environment, and Proof Of Stake nearly eliminates our footprint. With minimal server requirements to run a validator, only the initial staking amount creates the roadblock that I’ll be addressing.
You need 32 ETH to stake. This is $21,374CAD at the time of writing, and obviously, not everyone had that kind of money to lock up for a validator. At Ethereurums rudimental values, it needs to be decentralized, insinuating they would want as many nodes as possible! The logic behind it is that if it were a smaller amount, so many people would stake, that the network would be unusably slow.
The main problem
With many people having fractions of an Ethereum rather than the full 32 ETH, it’s only sensible that pools will arise. This creates vast trust issues; let’s take Coinbase, for example. A pool would allow the masses to contribute, splitting both the costs and rewards of staking all managed by the pool (Coinbase for this example). With Coinbase being the biggest cryptocurrency exchange, according to investopedia.com, they would have massive control over the network. While although it is unlikely such a big company would defy trust like that, it is no different in believing in governments.
Bitcoin will do to banks what email did to the postal industry — Rick Falkvinge
Bitcoin is undoubtedly the biggest and most impactful cryptocurrency ever. It has had the most prominent news presence, especially in the bull run of 2017; nearly everyone knows it. Bitcoin is decentralized. To face a 51% attack is next to impossible with the estimated millions of miners; it is unfeasible for a takeover to happen, but that doesn’t mean it is perfect.
Things get a bit better when looking at bitcoin. Anyone can mine and validate bitcoin regardless of computer specs, just maybe not with great success.
The Main problem
According to Cornell’s study, the top 4 mining entities control more than 50% of hash rates, which is enough to blast a crypto nerd off their chair! While it has been disputed the exact number, it is a scary thought to see the truth of just how decentralized the top dog currencies are! Due to ASIC mining, with major companies like BitMain producing these highly niche chips, they keep their technology for themselves for a little while before making a better one and releasing old ones to the general public. Believe it or not, it’s completely legal too! With bitcoin not having a government, we can’t do anything about it, and if we could, the companies could claim it was “testing”.
With 2% of wallets holding over 47% of bitcoin in circulation, it makes the currency very susceptible to market manipulation. We have seen this before, with the best example being this month’s massive bull run, with volumes hitting ATHs, so does the price of bitcoin among many other cryptos! While whales haven’t caused any detrimental issues on the network, there are several groups that deliberately use the same trades to enhance profits.
What We Can Do
We decide what we use! Money is a tool to store value, and we have options! The connotation that we are locked into what our government gives us is outdated now; we are at a technological point where we can use anything. Nothing backs the fiat cash we all use today, just our trust. The problem lies with the masses being unable to agree on a value. We NEED to revoke the power of banking¤cies from the government; it’s simply not necessary. In the current system, there is corruption, unhealthy/unregulated inflation, and it’s hard to carry cash.
Fun fact: Amazon has a higher market cap than physical US dollars in circulation!
There is no perfect currency, but as they improve, we must adapt. It has been established that nearly all government currencies suck, yet we haven’t flocked to the alternatives. There are thousands of cryptocurrencies without the recognition deserved.
Money has power, the power we give it — Aleem Rehmtulla