A Critique of the Decentralized Asset

Satoshi Nakamoto came up with the idea of crypto, in 2009, for a decentralized digital asset as a monetary currency. It came from a direct reaction of the 2008 economic collapse. Today, I wanted to explore the idea of the global central banking and the fiat currency systems in place and include a modern critique to the idea of a decentralized asset.

Cryptocurrency functions solely on the back of blockchain technology, and in turn ironically, blockchain(s) give governments and big tech companies like Google the ultimate control. What’s sold as decentralization is, in truth, just an additional layer of centralized power, with Silicon Valley and government authorities continuing their powerful pulling of the proverbial “strings” behind the proverbial “curtains” of our proverbial “OZ” world.

The premise presented here is a provocative critique of cryptocurrency and blockchain technology, challenging the popular narrative of decentralization. Let’s break it down in detail, addressing the key points and exploring the nuances of the argument.

Cryptocurrencies, by design, rely on blockchain technology as their foundational infrastructure using a distributed ledger that records transactions in a secure, immutable, and transparent manner.

Using a decentralized ledger makes blockchain essential for cryptocurrency. Blockchain provides the decentralized ledger allowing cryptocurrencies to operate without a central authority, such as a bank or government. This ledger ensures that all transactions are verified and recorded in a tamper-proof manner.

Although, it should be easy to recognize and understand that the powerful ruling elite class would not want to simply give up their global dominance that easy. Therein, begins the regulation and control mechanisms that have developed over the past decade into the crypto ecosphere.

The original concept of crypto was to create a trustless system. Since humans, by nature, are incapable of regulating themselves, as a species, the evolving design created out of the elimination of control or corruption. Cryptocurrencies like Bitcoin and Ethereum rely on blockchain to create a trustless system, where participants don’t need to trust each other or a central authority. Instead, they trust the cryptographic protocols and consensus mechanisms (e.g., proof-of-work or proof-of-stake) that govern the blockchain.

Blockchain technology ensures that transactions are secure and transparent. Every transaction is recorded on the blockchain, and the ledger is publicly accessible, making it difficult to alter or manipulate. Without blockchain, cryptocurrencies would lose their defining features of decentralization, security, and transparency. They would revert to being centralized digital currencies, akin to traditional banking systems or government-issued digital currencies (e.g., central bank digital currencies, or CBDCs).

While blockchain is often marketed as a tool for decentralization, critics argue that it can paradoxically enable greater centralization and control, especially when governments and large corporations are involved. In order to truly understand this we must understand just how the current systems and those that control them works.

In order for governments to find their way into this emerging technology the system needed to find a way into this new paradigm. Governments are increasingly exploring CBDCs, which are digital currencies issued and controlled by central banks. While CBDCs use blockchain or similar distributed ledger technologies, they are inherently centralized. Boom.

Governments can program these currencies to enforce specific policies, such as tracking every transaction in real-time, imposing restrictions on how money can be spent (e.g., limiting purchases of certain goods), expiring money to encourage spending or prevent hoarding, freezing accounts or confiscating funds without due process. This level of control is unprecedented and could erode financial privacy and individual freedoms.

In order for our current corrupt system to remain in place, the ruling elite and, governments eventually found a way to control and regulate blockchain technology. Even decentralized cryptocurrencies are subject to government regulation. Governments can require exchanges to implement Know Your Customer (KYC) and Anti-Money Laundering (AML) policies, effectively linking users’ identities to their cryptocurrency wallets. This undermines the anonymity and privacy that cryptocurrencies were supposed to provide.

Power is dependent on control and big tech controls that infrastructure dependence. Many blockchain networks and cryptocurrency projects rely on infrastructure provided by big tech companies like Amazon Web Services (AWS), Google Cloud, and Microsoft Azure. If these companies decide to restrict access or impose conditions, they could effectively control or shut down blockchain networks.

As our technology advances in this digital world using artificial intelligence and data aggregation big tech companies have become experts at collecting and analyzing data. If they gain access to blockchain data (which is often publicly accessible), they can aggregate and analyze it to track user behavior, predict trends, and even influence markets. This creates a new layer of surveillance capitalism.

Therein lies the irony of the decentralized digital asset developed within centralized development practices. Many blockchain projects are developed and maintained by small teams or companies, often funded by venture capital from Silicon Valley. This raises questions about how decentralized these projects truly are. If a small group of developers or investors controls the direction of a blockchain project, it undermines the principle of decentralization.

This begs the questions, “Is decentralization simply a myth"?” The claim that decentralization is a myth suggests that what is marketed as a decentralized system is, in reality, controlled by a few powerful entities. Let’s break this down a bit.

In proof-of-work blockchains like Bitcoin, mining power is concentrated in a few large mining pools. These pools control a significant portion of the network’s hash rate, giving them disproportionate influence over the blockchain. For example, if a few mining pools collude, they could execute a 51% attack, compromising the network’s security.

In proof-of-stake blockchains, wealthier participants who hold more tokens have more influence over the network. This creates a system where the rich get richer, leading to centralization of power among a few large stakeholders.

Most blockchain projects are governed by a small group of developers or a foundation. These entities make critical decisions about the network’s future, such as implementing upgrades or resolving disputes. This centralization of decision-making power contradicts the ideal of decentralization.

In order to the crypto ecosystem to integrate and become a part of the new world order the technology needed to maintain its dependence on centralized exchanges as the gatekeepers of cryptocurrency. The current systemic model needed an upgrade. Now, most people access cryptocurrencies through centralized exchanges like Binance, Coinbase, or Kraken. These exchanges act as gatekeepers, controlling access to the cryptocurrency ecosystem. They can freeze accounts, delist tokens, or comply with government demands to share user data.

Many users store their cryptocurrencies in custodial wallets provided by exchanges or third-party services. This means they don’t actually control their private keys, which undermines the principle of “not your keys, not your coins.”

A few blockchains, such as Bitcoin and Ethereum, dominate the cryptocurrency space. This concentration of activity and value on a few networks creates a power imbalance, where smaller projects struggle to compete. This systemic volatility is where most people see some of the risks associated with crypto investing.

This systemic volatility is where many large scale investors find the huge profit opportunities. Many blockchain projects are funded by venture capital firms, which expect a return on their investment. This creates a conflict of interest, as these firms may prioritize profit over decentralization or community interests.

As you can see, Silicon Valley and government authorities have found a way of maintaining their pulling the strings. Many blockchain startups are based in Silicon Valley or receive funding from venture capital firms in the region. This gives Silicon Valley significant influence over the direction of the blockchain industry.

As mentioned earlier, big tech companies like Google, Amazon, and Microsoft provide the infrastructure that powers many blockchain networks. This creates a dependency that undermines decentralization.

Silicon Valley companies excel at monetizing data. If they gain access to blockchain data, they can use it to enhance their surveillance and profit-making capabilities.

Governments can exert control over cryptocurrencies through regulation. For example, they can require exchanges to implement KYC/AML policies, ban certain cryptocurrencies, or impose taxes on crypto transactions. Governments can co-opt blockchain technology for their own purposes, such as creating CBDCs or implementing blockchain-based identity systems. These systems may use the language of decentralization while being fully centralized and controlled by the state.

The premise that cryptocurrency and blockchain are not truly decentralized and are instead tools for centralized control is a valid critique, though it is not universally accepted. While blockchain technology has the potential to empower individuals and reduce reliance on centralized authorities, its implementation often falls short of this ideal. Governments and big tech companies have found ways to exert control over the blockchain ecosystem, whether through regulation, infrastructure, or funding. Ultimately, the degree to which blockchain and cryptocurrency are decentralized depends on the specific project and its governance model. However, the broader trend suggests that the promise of decentralization is often compromised by the realities of power, wealth, and influence in the modern world. This raises important questions about the future of blockchain technology and its role in society. Will it fulfill its promise of decentralization, or will it become another tool for centralized control?

Now, I wanted to take things a little deeper and include XRP into this discussion.