Of Decentralization and Mass Adoption
The supposition that true decentralization exists in cryptocurrencies is a myth.
What those in the crypto community who champion decentralization conveniently overlook is that there is an element of centralization in all cryptocurrencies, just by virtue of how they operate. Miners and major stake holders have influence far beyond what could be termed as decentralized. Hell, now you have people threatening 51% attacks and totalitarian governments virtually in control of blockchains. How is that decentralized?
Throw in the manipulation of many tokens by whales, cartels, exchanges and the like, and you have something that is nothing like the libertarian vision of the original bitcoin.
Time for a reality check. I keep hearing over and over again the terms “mass adoption” and “universal acceptance.” If this is a true goal of a cryptocurrency, and it should be, then there must be centralization in order for it to work.
Why?
Because mass adoption won’t occur unless those who now dominate the flow of goods and services, ie: Amazon, Walmart, etc., will accept a cryptocurrency as payment. There are several things that the currency will have to provide for that to happen, and much of it includes centralization of certain aspects.
- The token will need to be valuable and must be stable. No major purveyor of goods and services will accept any currency that has significant swings in value. This will most likely take the form of a stablecoin which is backed by assets that may be held in banks.
- The token will have to fall under some type of governmental regulation, most likely in the form of the SEC. No big player wants to get involved with anything that is unregulated and could cause either losses to its customers or a scandal when that entity is finally sanctioned by the regulators.
- The company behind the token will have to be transparent with regard to its dealings and its officers. Again, this will be addressed by regulations, as it is with any publicly owned company under the jurisdiction of the SEC today.
Unfortunately, the vast majority of the cryptocurrencies today, including bitcoin, ether, and XRP, will not meet the requirements that will be placed on any currency to be widely accepted in commerce.
True decentralization is a dream, indeed perhaps a noble dream, of the libertarian mind. For a cryptocurrency to be universally accepted as a medium of exchange, a good deal of centralization must, and will, take place.
Once the purists are compelled to abandon their decentralization dream, a true hybrid crypto which incorporates banks, investment companies, and the government will emerge.
Mass adoption will not occur without the necessary regulation and auditable collateral for the currency. This will also require a good deal of centralization.
There are other elements which will be necessary for mass adoption. Ease of use, economy, speed, and the ability to settle micropayments are among these.
It would also be nice, not necessary but nice, if the crypto were also a true store of value, unlike today’s fiat currencies.
Once this laundry list is completed, a cryptocurrency will come to the forefront which will be acceptable to all concerned — buyers, sellers, financial institutions, governments, investors.
Unfortunately, that eliminates virtually all of the cryptocurrencies in circulation today.
Oh well. I suppose you can’t make an omelet without cracking a few eggs.
Full disclosure: I am the CEO of Monetran LLC, an internet fintech company. Among our developments is Moneda, an asset-backed, redeemable Stellar stable token. Further information can be found here.
