The Increasingly Important Task of Promoting Decentralization in the Cryptocurrency Industry

Decentralization has become a hot topic in the past few years as competing blockchain projects criticize the perceived centralization of their opponents.

When Facebook officially announced recently that it would be launching its very own digital payment system, millions of people around the world were exposed to the term ‘cryptocurrency’ for the first time. While anyone with access to the Internet will most likely know what Bitcoin is, few genuinely understand the cryptocurrencies in detail. Now, as more corporations begin to get involved in the ‘digital cash’ revolution, it becomes increasingly important that the original purpose of Bitcoin is not lost.

In a recent interview with crypto news site Coindesk, renowned economist and vocal crypto-skeptic Nouriel Roubini felt compelled to note the lack of blockchain characteristics found in Facebook’s new coin.

“It has nothing to do with blockchain. Fully private, controlled, centralized, verified, and authorized by a small number of permissioned nodes. So what is crypto or blockchain about it? Nothing,” he stated.

Nouriel Roubini has branded Bitcoin fans as “clueless” in the past | Image source: Shutterstock

Imagine buying into Facebook’s new ‘cryptocurrency’ with aspirations of escaping the corrupt clutches of the banking elite only to find you are right back where you started? Despite efforts by Facebook to spread governance of it’s ‘Libra coin’ over several various tech and finance companies, it essentially remains a private, centralized system. In order for any peer-to-peer digital cash to operate independently of government or corporate control, it must be proven to be fully decentralized above all else.

Decentralization is a hot topic

Decentralization has become a hot topic in the past few years as competing blockchain projects criticize the perceived centralization of their opponents. Even Bitcoin itself has not been immune to the criticism, with several researchers pointing out the ever-growing Chinese mining pools that control almost 50 percent of the networks hashrate. However, the Bitcoin network still represents one of the most decentralized blockchains due mostly to its massive size and the widespread distribution of its nodes.

Recently, the cryptocurrency rating agency Weiss Ratings downgraded its score for the EOS blockchain, citing what it called “serious problems with centralization.” According to the agency, doubts have been raised as to the legitimacy of voting results due to alleged collusion between block producers. As a result, the price of EOS immediate fell by over 20 percent in value, revealing just how much importance the crypto community places on decentralization.

Image source: Shutterstock

Solving the problem of trust

The need for decentralization stems from the problem of trust that exists in a centralized system. As Satoshi Nakamoto pointed out in the original Bitcoin announcement: “The root problem with conventional currency is all the trust that’s required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust.”

A correctly implemented, fully decentralized consensus method should be one that ensures network control is fairly distributed and that no single party or colluding group can ever inflict a controlling influence over the system. In fact, many believe that one of the main reasons that Satoshi Nakamoto has maintained anonymity to this day is to ensure that Bitcoin would never be seen to be owned by any specific group or individual.

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