Is Widespread Adoption Leading Us Closer To Centralisation?

Decentralisation is the crux of cryptocurrency. Blockchain technology was built to be a trustless system where no one institution, group, company, or individual had ultimate authority to pollute the system in what is a pseudonymous, transparent, and immutable ledger. Blocks would be – and are – validated by a peer-to-peer network. The network itself is based on blockchain technology, and all cryptocurrencies and dApps subscribe to the idea of decentralisation as an organising principle.

In the beginning, it was only possible to trade Bitcoin, but, after a while, more and more coins came on the market. Although the concept was flying, volatility was immediately notable. Each token has inherently volatile prices because they have no intrinsic value, nor are they collateralised by fiat money or precious metals (although stablecoins prove an exception to this). Despite high-profile falls in value, however, crypto continued to grow and remains on the rise today. Individuals, groups, companies, and institutions remain committed to a future in which crypto has relevance, use and purpose.

Crypto And The Future

In this way, although prices often drop (note the current lull in the market caused in part to the Tether and Terra de-pegging incident back in May 2022), many see it as a bi-product of the immense opportunity that cryptocurrency provides. In fact, for more hardcore investors, bear markets are actually an opportunity to “weed out” the short-termists, clearing up the market for when the winter ends and the prices begin to rise once more.

With this in mind, the continued adoption of cryptocurrency doesn’t look set to end any time soon. But something is going to give. The more popular cryptocurrency gets, the more room there is to see the faults in its makeup, and if Web3 is truly going to come to fruition in 2030, then there will be many looking to smooth out the system. Perhaps, even, through changing the nature of blockchain itself.

Adoption Of Cryptocurrency

There are growing numbers of crypto users across the world. Most notably, the UK (6.1%), the United States (22%), and Australia (3.4%) but also Nigeria (6.3%), the Philippines (16%) and Thailand (5.2%). This is mainly due to two key factors that blockchain provides:

• Technological advancement and solutions: a simple pursuit of new ideas and concepts which offer advantages over the old system in its current iteration, with a long-term goal of replacing traditionalism altogether – namely through blockchain-based apps, platforms, and currency.
• Financial access: in some countries, accessing bank accounts can be difficult. While there are risks involved in investing fiat currency in crypto – as is standard with all investments – many investors found it useful to complete transactions, improve savings, and conduct business.

While these ideologies are inherent within widespread crypto adoption, there are also those simply looking to capitalise on price and interest. Market players whose main aims are to make as many gains as possible. (This is these interested parties that the crypto winter, crypto believers hope, will weed out.) It is here that the crypto market starts to run into issues.

Changes To The System

Firstly, hacking and scams have occasionally been implemented within investment success stories, which is of genuine concern to the believers of crypto’s long-term future. These scandals essentially pollute the trust that blockchain has garnered so far, and for amateur investors who are dipping their toes in the water, they cast doubt on what are otherwise legitimate coins and platforms.

Secondly, the pooling of coins and mining power is a significant threat to fully realised cryptocurrencies – in particular, Bitcoin and Ethereum – and their performance in the future. While accumulation of wealth in major coins offer certain stability in the market, an acceleration can instigate heavy volatility (which is part of what we are seeing in late 2022), making what should be accessible money inaccessible.

There have been ongoing debates about how these issues can be alleviated, all of which have only grown more prominent in the public eye (especially with the implementation of Web3 looming nearer). Many of the answers, however, have led back to the question at the centre of blockchain’s network: how long can decentralised technology last?

Centralisation As An Answer

Over the last couple of years, a number of government officials have stated that, in order to thrive, cryptocurrency will need to implement laws and regulations. Legislation itself means that a central authority (or authorities) will dictate what is lawful. In turn, this would protect investors from scams, create taxable wealth and uphold business standards. If this is achieved on a global scale, it means that cryptocurrency – which should be decentralised by nature – will become centralised, and permitted by authorities.

The issue with this is that blockchain was created to subvert centralisation. In many ways, it can be seen as a protest against traditionalism and centralised government bodies determining how citizens and businesses trade. If it were to be centralised, then the point of its technology (as well as the reason it is being so widely adopted in the first place) may become entirely irrelevant.

The Existing Centralisation In Blockchain

With this being said, it could be argued that centralisation has already begun to take hold in some sectors of blockchain. Take Ethereum, for instance. Those who trade Ethereum have been looking forward to the merge for years now (the official move over from the proof-of-work system to proof-of-stake). It has recently been reported, however, that the majority of Ethereum nodes which will be involved (4,653 in total) are being run through centralised companies. Over 50% of Ethereum nodes will be coming from AWS (Amazon Web Services), with 15% from Hetzner and 4.1% from OVH.

Centralisation, then, isn’t such a new topic when it comes to cryptocurrency (even if the current existence of centralised authorities is not widely communicated). This is not to mention that those with more wealth – such as crypto whales – hold more power in the crypto world anyway (which arguably goes against the decentralisation principle). But there is a difference between failing in theory and overhauling blockchain’s concept altogether.

Although this widespread adoption is likely to cause more of a push toward centralisation, it is still up to the networks themselves to keep it as close to its decentralised origins as possible. If this fails, then it is appropriate to signify the experiment of cryptocurrency as having failed. There needs to be a greater push toward power distribution, with users themselves having a say in how the network develops. Only in this way can the aforementioned issues be appropriately addressed and the creases in blockchain ironed out.