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False Sense of Decentralization May Distort Public View of Cryptocurrencies

  • Darryn Pollock
    SingUlarity

    84 percent of cryptocurrencies are not really decentralized: report

False Sense of Decentralization May Distort Public View of Cryptocurrencies
Cover image via u.today
Contents

One of the main pillars of cryptocurrencies and their Blockchain technology is the decentralized nature of the tokens. Bitcoin has been heralded as a financial system that has no central leadership and thus is fully decentralized.

However, this effort to be decentralized is not a black and white issue, more of a sliding scale which allows many cryptocurrencies to claim decentralization while being predominantly centralized and controlled.

A recent report has pointed out that as little as 16 percent of all cryptocurrencies are truly decentralized in the manner in which Satoshi Nakamoto intended when he created Bitcoin. There are other questionable examples, such as XRP under Ripple Labs, but there is also a host of cryptocurrencies that are falsifying their decentralized nature.

The issue is, much like the exchanges that dominate the cryptocurrency space, there is this false belief in decentralization while behind the scenes, developers and other leaders are controlling the way in which these Blockchains operate. As an emerging ecosystem that is supported by the notion of decentralization, this is problematic as it is being built on a lie.

Surprising facts

Cryptocurrency research firm CryptoCompare released its annual Cryptoasset Taxonomy Report and revealed that 84 percent of cryptocurrencies across the market are not really decentralized. Some were either fully centralized or only semi-decentralized.

It is a sign of the times that there is the case in the cryptocurrency market as things have changed a lot since Bitcoin was created as a defiance against the centralized banking system in the wake of the 2008 financial crisis.

Now, the trend is largely driven by the rapid growth of new utility tokens running on private servers. Only nine percent of all utility tokens were found to be sufficiently decentralized. Cryptocurrencies that function primarily as a means of payment, such as Bitcoin, Litecoin, Stellar, and others, are among the most decentralized types of crypto assets.

But, there are also those that are well known to not be decentralized, such as XRP — and now also EOS which has shown that only 100 addresses contain 69 percent of the network’s native tokens.

The problems with not being decentralized

Bitcoin and the rest of the emerging cryptocurrency market are still incredibly new, yet its rally to $20,000 made it also very interesting, propelling it into the mainstream. This has led to a boom in new cryptocurrencies and Blockchains being built, but it has also led to a desire to control.

Ripple Labs is one such company that has not shied away from the centralized control of its tokens, wanting to be the master of the XRP and where it can and cannot be used. However, other companies have used the decentralization as a selling-point, while maintaining control over the asset.

Really, the world has moved on enough where the direct need for decentralized tokens is not as pressing and in many respects has been met by the 16 percent which are considered fully decentralized.

Additionally, those that are considered fully decentralized are either well-regarded or have been around long enough to be considered stable and safe.

But those coins that are entering the market with little more than a dream and a white paper, spouting off about decentralization when it is clearly not present, are causing a fictitious trap.

Honesty and integrity

The principle behind decentralization is obviously important and big in the cryptocurrency space, but it does not necessarily need to be the only option. There is no problem with companies bringing out centralized tokens if they believe they can run it correctly, but there really needs to be more honesty.

The cryptocurrency space is still rife with scams and unknowns, as well as hidden agendas and get-rich-quick-schemes, thus to lie about decentralization is again damaging the perception of this emerging space as much as major hacks on exchanges are.

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About the author

Darryn Pollock is an award winning  journalist from Durban, South Africa. He picked up Vodacom’s Regional Sports Journalist Award in 2017 while expanding his Blockchain and cryptocurrency reach.  He is a contributor to Forbes, Cointelegraph, Binary District, and of course, U.Today. Darryn’s belief is that Blockchain technology will be the driving force of the next technological wave and it is the obligation of journalists and writers to tell its emerging story with integrity and pride.

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Top Bitcoin Miner Warns – Bitcoin’s Privacy Features Are ‘Quite Poor’

  • Yuri Molchan
    📰 News

    The head of a major Bitcoin mining pool says that Bitcoin privacy is weak and must be improved to prevent BTC from avoiding governments’ clampdown

Top Bitcoin Miner Warns – Bitcoin’s Privacy Features Are ‘Quite Poor’
Cover image via www.123rf.com
Contents

The CEO of one of the largest BTC mining pools, Poolin, has recently stated in an interview that Bitcoin privacy has to be improved. The current privacy features make BTC vulnerable to potential regulatory bolt tightening, says he, as reported by Forbes.

The Poolin mining company was set up by several former employees of BTC.com – a world’s major mining pool, a subsidiary of Bitmain. Among them was the Poolin’s current CEO Kevin Pan.

“Bitcoin’s privacy features are quite poor”

Over the past years, developers have suggested several ways to improve Bitcoin’s privacy. However, those were rejected by the community, since they would hard such major things as security, scalability, etc.

A good example here is Confidential Transactions that were among those suggestions. They disguise the amount of BTC sent in transactions. However, the integration of it was rejected, since it could have had a negative impact on the public verifiability of the present BTC supply.

Kevin Pan says that privacy is much more vital for a crypto asset development than scalability. Pan says:

“There is no other big question if the privacy issue is solved.”

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Governments may start controlling BTC miners

The company CEO believes that in theory, authorities or law-enforcement agencies may start telling miners to block certain address from receiving funds or sending them. However, in that case that would have to be 51 percent of the BTC network.

Pan believes that unless a solution to this problem is found soon, governments will get a chance to prevent transactions to certain addresses from happenning.

“What is more troublesome now is if government or law enforcement departments begin to create a blacklist of transaction addresses, it will make certain transactions unable to be packaged.”

“In fact, these can be done. But if there is privacy, you can't know who the address belongs to, and you can't determine how much the amount is, and there is no way to control the currency system. So for me, Bitcoin is basically no problem if the issue of privacy can be solved.”

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China plans to clamp down on BTC miners

Previously, U.Today reported that Inner Mongolia, an autonomous region of China, plans to ban all the numerous mining pools located there soon.

Since this region is one of the biggest local crypto mining areas, some believe that China is about to ban mining of all cryptocurrencies ahead of the so-called ‘China Coin’ launch.

Do you think that poor Bitcoin’s privacy features could indeed bring down regulatory control over BTC one day? Feel free to share your view in the comments section!

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About the author

Yuri is a journalist interested in technology and technical innovations. He has been in crypto since 2017. Believes that blockchain and cryptocurrencies have a potential to transform the world in the future. ‘Hodls’ cryptocurrencies. Has written for several crypto media. Currently is a news writer at U.Today.

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