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A feature of blockchain technology and digital coins is the absence of a governing body. Due to this, cryptocurrencies are opposed to banks, payment services and other custodial financial institutions. But practice has shown that a distributed ledger can be either public or private. And centralized cryptocurrency, whose issuance, distribution and burning depend on the decisions of a limited number of individuals or even a single company, exists. However, there are no clear official delineations, so attempts to attribute a coin to a specific type are subjective.<\/p>\n
Banks, popular payment platforms PayPal, PAYEER, AdvCash are custodial structures with a single governing body. They form the basis of the traditional financial system. Centralization implies that a limited number of participants influence changes in the rules and principles of work.<\/p>\n
Although dozens of blockchain projects claim that there is no single governance, it is often not all participants who control the protocol. The coins of such protocols are only pseudo-decentralized.<\/p>\n
How governance is implemented:<\/p>\n
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\nThe creators of some tokens<\/span> and coins do not deny that the project is managed by specific companies. For example, 3 centralized cryptocurrencies dominate the market of stablecoins<\/span>, which are tied to fiat<\/span>.<\/p>\n The issuance, storage and burning of the top steiblcoins are centralized. Theoretically, this carries risks for holders, because as with banks, a user’s account can be blocked.<\/p>\n Tether has already frozen savings at the request of law enforcement.<\/p>\n There are projects that insist on their decentralization, although many cryptoinvestors are convinced of the opposite. The coin Ripple is the most frequently criticized. Lead developer Jack McCaleb left the project in 2013 due to the high centralization of the network, as well as its focus on corporations, banking structures and custodial payment services. To offer users an alternative, he launched another crypto coin, Stellar. Arguments for Ripple’s lack of decentralization:<\/p>\n Another criticized crypto coin is EOS. The principle of the network is based on the fact that only 21 validators are engaged in data storage, block generation and execution of smart contracts<\/span>. This ensures high throughput and fast transactions, but reduces decentralization.<\/p>\n Given the high reward for block generation, the validators selected in EOS are interested in staying in their “positions”. This leads to alliances where some node validators vote for others by agreement. A similar problem has arisen in the Lisk network.<\/p>\n Statements from famous personalities about EOS:<\/p>\n Decentralization is one of the most important issues developers tackle when launching a network. The term “blockchain trilemma” has even been introduced: how to achieve high scalability and throughput without transferring management rights to a limited number of individuals. In fact, each blockchain project has a different degree of decentralization. And in most cases, it is impossible to talk about achieving 100%.<\/p>\n Centralized cryptocurrency is beneficial to financial institutions, as it is more easily accepted by custodial payment services. And it often suits even investors, because such networks show higher throughput. On the other hand, they contradict the basic philosophy of the crypto world – decentralization. In addition, since third parties are involved, such coins are less reliable and safe.<\/p>\n \u2753 Which coins position themselves as the most decentralized?<\/p>\n<\/div>\n Ethereum Classis, Decred, Stellar, and Shiba.<\/p>\n<\/div>\n<\/div>\n \u26d4 Are blockchains always decentralized?<\/p>\n<\/div>\n No, according to international classifications, there are 3 types: open, consortium and private. The latter 2 have a governing body, privileged participants, and access to some or all of the information may be closed to the majority.<\/p>\n<\/div>\n<\/div>\n \u2754 Which blockchains are fully centralized?<\/p>\n<\/div>\n Monax Platform and MultiChain.<\/p>\n<\/div>\n<\/div>\n \u2757 Is Bitcoin the benchmark for decentralization?<\/p>\n<\/div>\n Theoretically anyone can start a node, but the hardware requirements are high, as is the competition. The threshold for entry is high. This leads to an oligopoly, where multiple pools own most of the hashrate.<\/p>\n<\/div>\n<\/div>\n \u2705 Will Ethereum’s transition to version 2.0. affect centralization?<\/p>\n<\/div>\n Yes. There will be a complete transition to PoS. In early 2022, when PoW was still used, most of the hashrate was shared by 5 pools, resulting in high centralization.<\/p>\n<\/div>\n<\/div>\n<\/div>\n Is there an error in the text? Highlight it with your mouse and press Ctrl<\/span> + Enter<\/span><\/p>\n<\/div>\n\n\n\n
\n \nName<\/th>\n Description<\/th>\n<\/tr>\n<\/tbody>\n \n USDT<\/td>\n Issued by Tether. It accounts for about 61% of transactions in the overall market. This koin was ranked as the #3 crypto coin in February 2022. It has a centralized vault for reserves that serve as collateral.<\/td>\n<\/tr>\n \n USDC<\/td>\n Circle is the issuer. This stablecoin accounts for 22% of transactions.<\/td>\n<\/tr>\n \n BUSD<\/td>\n Created by the Binance exchange in collaboration with Paxos. The crypto coin accounts for 9% of all transactions.<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n \n
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\nSummary<\/h2>\n
Frequently Asked Questions<\/h2>\n
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