The Dilemma of Centralization in the World of Decentralization

Decentralization is not just a buzzword in the crypto space but one of the core ideas behind the invention of Bitcoin and other cryptocurrencies. Bitcoin is unique because it functions as a monetary system without the need for a centralized third party. Additionally, many cryptocurrency projects are advertised as projects that will bring about decentralization in one industry or the other. In spite of the importance of decentralization in the cryptocurrency industry, one is met with numerous centralized entities in the space.
Many projects in the space are indeed run by highly centralized teams. Also, exchanges, which are perhaps the largest organizations in the space are also mostly centralized.
While there are impressive work and improvement on decentralized alternatives, the status quo is likely to persist if the decentralized alternatives are unable to favorably compete with the centralized organizations in the space. Even the proponents of decentralization are considering the current state of affairs a necessary phase during which the masses will be onboarded while decentralized solutions are being developed.
However, the reluctance of the masses to go by the ethos of the cypherpunks by prioritizing decentralization and privacy may contribute to the continued dominance of centralized entities in the cryptocurrency industry. The low liquidity and adoption of decentralized exchanges is a good example. The progress being made on seemingly centralized cryptocurrency projects such as Ripple is another. Additionally, the recent mass email leak scandal on BitMEX which exposed user data did not seem to move users. This shows that the majority of participants in the industry do not necessary have decentralization and privacy at the top of their priority lists.
Staying Aware of the Shortfalls of Dealing with Centralized Entities
If we are going to be stuck with the status quo, its best to acquaint ourselves with the things that could go wrong and prepare for them with prophylactic actions.
Loss of data and compromised privacy is one of the risks associated with transacting with centralized entities. It was revealed that the leaked emails from the recent BitMEX scandal include .gov as well as .edu email domains. The blatant disregard for privacy by some of the exchange’s users puts them at risk of being investigated for various offenses. Hackers and scammers alike, are likely to use the leaked information to perpetrate crime in the future.
Dealing with centralized entities also increases the chances of losing funds. There are countless cases of exchange hacks that have caused many to lose huge sums of money. Many individuals have also had their crypto assets hacked following social engineering and phishing attacks based on data stolen from centralized organizations. Ransoms have also become prevalent in the industry.
Mitigating the Risks
The usual precautions apply when dealing with the risks discussed above. Do not use the same passwords on multiple platforms; use two-factor authentication (preferably email in order to avoid SIM swap hacks) and never keep large sums of money on centralized exchanges. Most important is staying aware of the risks so we do not take things for granted and let our guard down.
