Decentralization — fiction or fact?

Published in

bartersmartplace

4 min readMar 11, 2022

The original idea behind cryptocurrencies, DeFi and DAO was not just about creating platforms for trading speculative assets. The concept was to get away from the monopoly of traditional financial institutions on the issue of money and the implementation of cross-border transactions. In practice, the majority of participants in the crypto market were far from the ideals of crypto-anarchism and were simply looking for opportunities to earn money — therefore, they did not care what platform they were going to trade on, centralized or decentralized.

Moreover, popular centralized crypto exchanges such as Binance, Coinbase, Kraken, Bittrex and others have provided opportunities that are not available to DEXs (decentralized exchanges) — namely, depositing and withdrawing fiat money. Few people are really working on the construction of infrastructure where one could buy food, transport, apartments for cryptocurrency. Aside from the speculative value, the maximum that this mass of crypto enthusiasts have come up with is the use of cryptocurrencies as a “safe asset” to hedge against inflation. Nevertheless, all this did not prevent such services from positioning themselves as free, decentralized, anonymous, etc. However, the behavior of these platforms is in no way consistent with the image of an industry free from traditional financial institutions and avoiding intermediaries.

The facade drops away

Let’s take a look at how many of the large centralized platforms are behaving.

Coinbase decided to block over 25,000 crypto wallets of individuals and legal entities in the Russian Federation.

Since March 10, Binance has stopped operations with Visa and Mastercard cards issued in Russia.

Several popular South Korean cryptocurrency exchanges have joined the sanctions, including Upbit, Bithumb, Korbit and Gopax. Upbit announced plans to start rejecting withdrawal attempts from Russian IP addresses.

Chainalуsis has created tools that can track the crypto wallets of users of the Russian Federation and the Republic of Belarus who fell under sanctions.

These are far from all sites that have decided on restrictions for clients from the Russian Federation and Belarus. We mentioned some of them recently in one of our posts.

Stablecoins can also fall under sanctions and be blocked on the wallets of users from the countries of the sanctions list. After all, stablecoins are programmable and can easily be stopped for transactions by the owner of this business.

Is centralization good or bad?

However, one should not think that centralization is something unambiguously bad. Centralized services usually involve custodial storage of funds, which means that you can recover your password in case of loss. Centralization simplifies the fight against fraud and allows you to build a more accessible interface and customer support. The entry threshold for decentralized services is still too high and requires technical knowledge in using web3 wallets.

The problem lies in the adequacy of the owners of centralized services. If you give your money to a centralized platform, then you must be sure that it will protect your interests. Therefore, it is now advisable for citizens of the Russian Federation and Belarus to choose for themselves domestic sites that will not block their funds for political reasons.

For companies from the Russian Federation and Belarus, this is a great chance to create their own, alternative services, because before the sanctions it was very difficult to compete with foreign sites.

In general, the current situation with sanctions creates a good incentive for the development of cryptocurrencies and other decentralized services among the general population, but even in these realities, few people will use truly decentralized services — because it requires a lot of expertise: understanding smart contracts, the ability to distinguish promising projects from fraudulent, the ability to build a decentralized management model. But decentralized services owned by foreign companies can also block IP access for users from their sanctioned countries.

Interest in cryptocurrencies and blockchain technology in general is growing in the Russian Federation and Belarus, but primarily as a means of fighting inflation and an alternative method of international settlements. For cryptocurrencies to become something more, a higher level of knowledge of the population about the blockchain, stable platforms for the exchange of assets, marketplaces with payment for goods using crypto are needed.

Summarizing

The following conclusions can be drawn:

-Now is the time for the Russian Federation and Belarus to create their own alternative blockchain services.

-Do not neglect decentralization in pursuit of convenience, one day you may become dependent on the arbitrariness of a centralized platform.

-Cryptocurrency should become something more than just a speculative tool, a hedge against inflation and a method of circumventing sanctions. To do this, it is necessary to create an infrastructure that will allow exchanging cryptocurrency not only for digital, but also for real assets. In the end, you can buy bread in the store using crypto from your wallet.