Do Centralized Cryptocurrencies Exist?

A consideration on the existence of centralized cryptocurrencies.

0

For the most part, many people who are new t the crypto space have been asking if centralized cryptocurrencies exist.

The truth is that distributed ledger technologies and its sub-elements were not designed primarily for centralization. 

There are many projects that claim to be decentralized but at the end of the day fail the common test that seeks to define what decentralization should be. 

It is All about Control or the Lack of it

The most important concept behind the decentralization of cryptocurrencies has to do with the issue of control.

Whatever system lacks some form of centralized control can be best said to be an almost-perfect decentralized system. 

In the design of such systems, tasks get done by cooperation rather than by decree, instruction, manipulation or deceit. 

The concept of democratization in some certain types of distributed ledger systems (such as the decentralized autonomous organizations DAOs) can be applied and will function effectively when it comes to decision making. 

This, however, doesn’t mean that democratic ledger systems don’t fail. 

It usually isn’t the system architecture that fails, it is the people within the system that fail first.

As such, ledger systems design must take into account the various aspects of human behavior that tend to fail first when transactions are required: trust and transparency.

The Core Test: The Byzantine Generals’ Problem

The basic issue that defines a ledger systems’ tendencies towards centralization or not has basically to do with how exactly the Byzantine Generals problem is viewed, perceived and applied in the context of the application.

This, of course, has created a new paradigm where control is vested with nodes across the ledger system with each little general having a sphere of control.

This then means that all the resources that require a node to function properly must operate independently of other nodes in order for true Byzantine fault tolerance to be achieved.

This is where cryptocurrencies controlled by corporations fail the test. 

The nodes which operate the tokens operate under similar resources which of course subjects the value of the token to some form of control.

However, independent systems where confirmation of entries into the ledger occur have all nodes operating in its own capacity without having an influence of any sort on any other node display true Byzantine fault tolerance and as such can be said to be truly decentralized.

The same can be said of cloud-based ledger systems. The basic problem here though is that the operating system on which the nodes work is based on similar or in most cases shared resources. 

These resources are in most cases centrally controlled one way or the other so they too create the Byzantine general’s problem and though will behave in theory like a perfect decentralized ledger system, still in nature and character will still be centralized ledger systems and in the particular case centralized cryptocurrencies. 

However, the degree of centralization of a ledger system depends on how resources are deployed and how nodes function in real-time.

There are many models that exist in the cryptospace but any system that involves shared resources in any way form or manner is subject to control and is centralized.

The truth though is that the cryptospace is still very young and these problems will emerge much later as new technologies, concepts and innovations are brought to light.

In answer to the question of the existence of centralized cryptocurrencies, the answer is yes!

But the degree of centralization is another matter entirely which differs from system to system and we shall see a decline in these kinds of systems as time goes by.

Decentralization rules!

Leave A Reply

Your email address will not be published.

bitcoin
Bitcoin (BTC) $ 7,242.86
ethereum
Ethereum (ETH) $ 144.70
ripple
XRP (XRP) $ 0.220207
tether
Tether (USDT) $ 0.999705
bitcoin-cash
Bitcoin Cash (BCH) $ 211.49
litecoin
Litecoin (LTC) $ 44.29
eos
EOS (EOS) $ 2.62
binancecoin
Binance Coin (BNB) $ 14.86
bitcoin-cash-sv
Bitcoin SV (BSV) $ 93.02
tezos
Tezos (XTZ) $ 1.73