Decentralization has become a buzzword in the virtual currency community. The word decentralized is often used to describe new coin projects or marketplaces, but what does being decentralized actually mean? A virtual currency is decentralized if it is not governed by a primary or central authority, such as a bank, national government, or major corporation. Decentralized virtual currency is not controlled by any major entity, making it an innovative approach to exchanging money.
The framework of the decentralization of virtual currency dates back to Satoshi Nakamoto’s creation of Bitcoin in 2009. At the height of the global financial crisis, Nakamoto was disillusioned with the economic landscape. As unemployment rose and home foreclosures skyrocketed, he created a unique form of currency which would disrupt the economic establishment. This became Bitcoin: a type of currency that didn’t belong to any government.
Bitcoin was one of the first global virtual currencies; it allowed individuals from all over the world to exchange money quickly and securely. Bitcoin was generally purchased with Fiat currency, but anyone with a bitcoin wallet could trade or exchange the currency.
The concept of decentralization has spread and evolved. Countless altcoins (virtual currencies based on bitcoin) have used blockchain technology to create their unique perspective on decentralization. In the last ten years, we have seen blockchain projects that incorporate decentralization through anonymous transactions, web browsers, and communication platforms. Most recently we have even seen the development of decentralized virtual currency marketplaces. These platforms allow trades to occur directly between users through an automated process, as opposed to relying on a third party.
Decentralization, when applies to both virtual currency and blockchain, is a revolutionary concept. The concept of decentralization on a global scale might be the starting point of something much more significant. A widely accepted global currency could be a portent of the way people exchange currency for goods and services in the not-too-distant future.
