Centralization and Decentralization: A Subjective Spectrum

Companies versus Communities

Bitcoin originally brought about the idea of a decentralized currency. This has paved the way for a decentralized economy (deconomy). Decentralization can be defined as not having one point of failure, or a movement from concentrated power to less concentrated power. For example, Bitcoin nodes are spread out across the globe, and attacking one node in the system will not compromise the network. A company usually has one central database upholding the entire network. Most companies have one, or a few databases containing all of their data, which is more vulnerable to attack/system failure as hackers target it. As the idea of decentralization is spread, mostly through cryptocurrency communities, more and more people are debating whether something is decentralized or not. A good indication of determining if something is centralized or not, is whether or not they can been shut down.

Decentralization of Mining

Bitcoin cannot simply be shutdown, therefore it is quite decentralized. However, Bitcoin does possess traits that have been obtained over time that makes it less centralized than other cryptocurrencies. For example, China hosts most of the Bitcoin mining hardware. This means more bitcoins are being distributed in China than any other country. Another example is that the network has grown so big, that only the most powerful computers can mine bitcoin, making it more difficult to mine for the little guy.  This has led to many forks in the Bitcoin code, that are ASIC resistant, meaning their code does not allow for application specific miners to distort the distribution of new bitcoins.

Many coins reserve mining for those who run a CPU or GPUs that are found in consumer level computers. This keeps mining cheap and more evenly distributed. However, if a digital asset becomes valuable enough, people will find a way to create mining specific hardware. Creating mining specific hardware is only more difficult to manufacturer. It does not stop ASIC mining entirely. The crypto mining paradigm is much like the rest of computer coding world, subject to cat and mouse games. Though Bitcoin may become more or less centralized over time, it is exponentially more decentralized than traditional banking systems. The state has always controlled all the money printing, and manipulating value. This makes fiat currencies 100% centralized.

Currency Capitalism

The creation of Bitcoin is like opening Pandora’s Box. Cryptocurrencies decentralize our money system by giving us an alternative to the risks that traditional institutions take with our fiat currencies. Historically, banks and governments control any kind of legal tender and wasn’t open to currency capitalism. With the advent of Bitcoin, other players can use the blockchain model to create their own form of money, for free. The best system will attract the most amount of users, giving the most benefit to the rest of the world.

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