Cryptocurrency has risen in the markets and imaginations of traders around the world in recent years, all on the premise and promise of peer-to-peer decentralized financial networks that can’t be effectively stopped by entrenched powers such as corporations and governments. While I wholeheartedly agree with this mission statement, and believe this incredible technology will eventually fulfill that purpose, I see that we still have a long way to go. The crypto world is still pretty centralized and vulnerable.
Pure speculation centralized crypto around exchanges
At present, most cryptocurrency use is focused on speculation and day trading. For evidence of this, look at two events and their affect on the price: Bitcoin’s fees and confirmation times spiking, and China shutting down exchanges. The first had a drastic effect on the coin’s practicality for the use for which it was intended, yet the price remained highly resilient. The second represented a shuttering of a minority of trading volume, but the resulting drop cut the collective value of cryptocurrency almost in half. The clear lesson: the market cares most about trading, and centralized exchanges are a very easy target to take this down.
Bitcoin remains the “infrastructure hog,” can crash the markets
The next point of centralization is paradoxically in a decentralized network. As the frontrunner of cryptocurrencies, Bitcoin has a significant lead in valuation as well as integrations and infrastructure. While there is nothing inherently wrong or vulnerable about this, centralizing functionality around a single chain makes all others vulnerable to what happens to the first. Normally, bad news for a single coin affects only that one project, but when Bitcoin drama is involved, the whole field shakes. No matter how censorship-resistant a coin aims to be, it remains beholden to the leader of its field.
Tools for true decentralization are there, but must be us...