Is Decentralized Centralized?

Vitalik Buterin VS Changpeng Zhao

I always found it strange when people refer to decentralized as completely decentralized when it comes to cryptocurrency. Because, there is never truly such a thing as decentralized. It is always run by someone (some people).

Vitalik Buterin said during an interview at the Tech Crunch sessions: Blockchain 2018, that he hoped, “centralized exchanges burn in hell as much as possible”.

He continued, stating that centralized exchanges wield “stupid king-like power”,  since they have the ‘power’ to chose which cryptocurrencies “become big” after making projects pay extortionate $10 to $15 million in exchange listing fee’s.

Many people, even cryptocurrency users might not have known that. Yes, you’re favorite coin has to pay up if they are going to be listed. And Buterin’s not wrong to say this.

However, there is a lot of hypocrisy in Vitalik’s statement.  He has the resources to make his own decentralized exchange if he wanted to but has not.  And further, it is his Ethereum honestly that enabled most of the ICO scams out there and is one of the worst and most vulnerable currencies in my opinion.  His idea of decentralized is the wild-wild west of the internet full of scams and fraud.  Let’s look at a popular decentralized exchange like “Etherdelta”.  It is widely known as a scam where people have lost money.  And it’s no wonder since almost all of the decentralized exchanges I’ve seen A.) don’t work right, and B.) force you to create a wallet where they hold and control the private keys (you cannot use your own wallet at least with ones like Etherdelta).

Considering Ethereum is essentially also a centralized currency which is first and foremost controlled by Vitalik.  Some of you are probably saying ‘how’, it’s a decentralized cryptocurrency. And some of you Tech nerds already know the back end side of all cryptocurrencies, and that it’s controlled essentially by someone. Even Bitcoin is being handled and maintained by people, it might not be “Satoshi Nakamoto” but it’s got people working and controlling it.

This verbal trashing of exchange, caused Binance Founder, Changpeng ‘CZ’ Zhao to respond on Twitter.

Zhao pointed out several flaws in Buterin’s argument.

“There is no absolute decentralization. Projects with core teams still have centralization. Today, Vitalik probably has more king-like powers than anyone else in this industry, and has used it, by serving as advisors to projects, therefore helped to decide their fate, at least fate of their ICOs to a large extent.”

He went on to say that “decentralization is not safer by default” and this was clearly supported by recent hack of decentralized exchange Bancor. Which saw $12 million worth of Ether as well as EtherDelta falling victim to a phishing attack late last year.

Zhou isn’t wrong, but he’s not right either.

Buterin chose not to reply publicly instead opting to respond to a cheeky Tweet from a new French cryptocurrency exchange Blockchain.io that asked whether their “decentralized settlement feature” would send them to purgatory.

Buterin  responded in French saying:

“It’s much better than a fully centralized exchange, but it doesn’t solve the other problem, as centralized exchanges have a lot of control over the market and can choose which currencies become the most popular etc etc. In all, I think this is a very good idea and I hope that more cryptocurrency exchanges will use this semi-centralized method.”

IDEX, is pretty much one of the most popular semi-centralized crypto exchanges as they offer features from both centralized and decentralized exchanges is currently ranked #91 in terms of total trading volume for all crypto exchanges in a 24 hour time frame.  I attempted to use it when it first came out and had nothing but problems and their support chat and twitter were full of complaints about scams and lost money and balances.

Apart from IDEX, there are several other decentralized exchanges ranking within the top 100 overall trading volume for crypto exchanges. But still, majority of the volume is held dominate by centralized exchanges.

The reason why it’s dominated over decentralized exchanges, is because of the scams, and no accountability. People naturally choose whats more ‘safe’ when it comes to their money. And in this case, centralized exchanges are safer.

But both Zhou and Buterin agree, that decentralized exchanges are the best option moving foward. I disagree with both.

In March, Binance announced their intentions to launch a decentralized exchange along with a public blockchain:

“Centralized and Decentralized exchanges will co-exist in the near future, complementing each other, while also having interdependence.” — Binance

There are hybrid exchanges already like the Binance is proposing. Blockchain.io and IDEX are two good examples.  Blockchain.io is still in the process of doing it though.

Although I understand the thought process behind this, as a IT professional and investor, this decentralized exchange is a open door to insanity. Nothing, not even cryptocurrency is 100% decentralized, that’s impossible and incredibly unsafe. Cryptocurrency is already filled with a lot of fraud, scams and hacks (but still not as much as Fiat currency by the way), but having decentralized exchanges is just asking for double the trouble.

At the end of the day, we just need a better coin and a better exchange, otherwise we’ll fall into the same traps as Fiat, and reguritate the same ol’ system again.

What do you think?
Cheers,
A.Yasir

Coinbase To Support Ethereum ERC20 Tokens

Coinbase just announced it will be supporting the trade of ERC20 tokens.  A lot of times in the crypto world I look and shake my head and I just can’t stop with this one.  I could see if Coinbase wanted to support actual currencies like Ripple, Lumens, Monero etc… those are reasonably safe currencies to invest in.

ICOs which are essentially crowdfunding/pseudo-stocks (depending on who you ask) are extremely risk and I would say about 90% of those are fraudulent in that they collect your coins and never intended to deliver anything.  I think we can all agree at any rate that ICOs are extremely risky and HODLING may be as useful with those tokens as holding RIM stock.

Coinbase has a huge client base and is one of the easiest ways for people to get into cryptocurrency.  However, they risk bringing regulatory wrath and also dampening new investors from coming in when they get burnt on these ICO scams.

It’s recently come to my attention that some people weren’t aware that Ethereum Smart Contracts or ERC20 tokens are not vetted, supported or approved by the Ethereum team in any way.  This is  huge issue of course and why I am so against smart contracts at the moment.  Let’s get cryptocurrency as an infrastructure in terms of B2B,B2C,C2C etc… working fast, efficiently, securely and easily before biting off more than we can chew!

I am also at a loss as to how the Coinbase legal team approved this one?  Did they run it by any counsel at all?  I think if and when people lose massive amounts that Coinbase could be held liable regardless of waivers and disclaimers for losses in some of the huge ICO busts and scams to come.  Especially when there are so many other avenues and stable currencies they could have directed their customers to.

I am fearful for the investors, for Coinbase and the cryptocurrency market as a whole but should these warnings go unheeded and “things go terribly wrong” then it would be a good, fresh start for the industry.  Investors also need to do their diligence and exercise good understanding and judgement before making investment decisions.

It will be interesting to see where this leads but I would never recommend any friend or family member to invest in any Ethereum Based Token ICO and to stick with solid and real cryptocurrencies that solve the problems of today.

US Cryptocurrency and ICO Regulations Push Business Overseas

First of all bravo for Coinbase, with a lot at stake itself, for getting this issue right in the following quote:

There is so much uncertainty about the definition of a security and the scope of regulatory control that the market is being chilled. This is bad for everyone because the technology won’t stop — it will simply move overseas and we will miss out on the opportunity to cultivate the benefits in the U.S.

Much like I’ve been saying is that governments who are overly aggressive, ambiguous and don’t create a fair playing field for cryptocurrency and related companies will be sidelined.  Cryptocurrency cannot be contained by borders anymore than the web could be.  Naturally, I do agree certain practical laws and regulations should apply but the laws should be clear and easy to follow.  If companies are essentially being threatened, raided and faced with uncertainty it hurts both the company and investors.  Ultimately as I’ve said before it will drive these huge sums of money away to countries that treat cryptocurrency users, traders and companies well.

There are so many conflicting statements from governments around the world and multiple bodies in the US.  It sometimes seems as if government officials and bankers who have a lot of input in these matters diverge on the matter.  This is OK but it should not be reflected by creating an atmosphere of fear and confusion whether by design or by fluke.

We all see the market has been impacted significantly with nothing but negative press for cryptocurrency but I believe it will resolve on the upside as investors realize it isn’t going anywhere and no single government or bank can ever stop it.  In fact I predict that the market may just start using more privacy and security based coins and trade them exclusively and directly for goods, bypassing fiat altogether.  Ironically this is probably the last thing governments and banks want but this is where all of this action is heading towards in my opinion.

 

Ethereum’s Issues Stem From the Basics

Ethereum is certainly #2 in the market capitalization only second to Bitcoin but it doesn’t mean it’s as easy to use.  In fact I suspect my recent experience is what is keeping it from rising, Ethereum makes me nervous and reluctant to use it everyday. As someone who has used the client’s/wallets for both I find Ethereum’s is cumbersome and at times impossible to use, thus preventing the user from using it to do any transactions at all.

Imagine if a simple eTransfer or Wire from your bank took over a week to initiate?  That’s way too long and beyond the purpose of the infamous but in practice non-realtime transactions in the cryptoworld.

I spent nearly a week syncing 4 months of blocks!

I needed to do a transaction in Ethereum and opened up my Ethereum Client which slowed my whole computer down and ultimately wouldn’t update past a certain point.

I consider myself an above average user who is good at troubleshooting issues.

I updated to the latest Ethereum client and that still didn’t fix it.

Some users suggest deleting the “chaindata” folder and that didn’t fix it.

Eventually I decided to do delete the whole “Ethereum Wallet” folder (never do this without backing up your keystore files safely).  Also be aware that this folder “Ethereum Wallet” is not where your keys/wallet data are stored.  In Linux they are stored in “~/.ethereum/keystore”which is very misleading when you have a “~/.config/Ethereum\ Wallet” (which is not where your wallet data or keys are stored).  I stress this because I came across many who had sworn off the Ethereum Coin and team because of this confusion where they lost their keys and ultimately their investment and coins.

The solution was to delete “~/.config/Ethereum\ Wallet” but the fun didn’t stop there.  It was updating so slow through the missing blocks that it felt like I was mining the entire blockchaining (you could literally count 1 by 1 as it was processing or sometimes it would take minutes on a single block).  I’ve been able to sync the whole Bitcoin or Litecoin Blockchain more quickly and without or much impact on my computer.

I decided to switch the chaindata for Ethereum to SSD it did speed things up but not significantly and still took about a day to catch up and my computer still did slow down.

What I Learned About Ethereum

For all of its features I think the team is out of touch with getting the basics right first, as evidenced by the “Parity” fiasco where through no fault of the users people have essentially lost or have 160M worth of Ethereum coins frozen and lost presumably forever.  I have never seen this with another major coin.

Nor have I seen or experienced the confusion on basics of why their client is so complex.  Why does it use another program geth to sync the data?  Why are there so many different choices, fast sync (which didn’t help speed things up for me), a MIST client and so many different confusing and unnecessary choices and complexity?

I like how I can just download the Bitcoin client or Litecoin client and it works simply, there’s no guessing or confusion.

When it comes down to it, if someone with my background is having to troubleshoot and it slows me down from doing transactions, or I fear my coins could randomly be lost it doesn’t bold well for Ethereum’s future.  I don’t mind leaving other wallets running but Ethereum just takes too much computing with SSH so it’s not practical.  I will consider Ethereum a wise investment with some risks I’ve highlighted above but for any cryptocurrency to truly be accepted and successful it must be secure, fast, reliable and easy to use (something which most cryptocurrencies still fail at if not for the reason that you require the whole blockchain to keep your money in your own possession or have to rely on dangerous uninsured third party exchanges or services that are often hacked).

As we can see below this is not a sustainable practice for cryptocurrency going forward and I will be posting more about how I think the future of crypto will be significantly different than we currently see.

Screenshot-Ethereum Wallet-19

Countries where cryptocurrency, coins, tokens and ICOs are banned

There has been a lot of activity lately in the world with governments banning cryptocurrency and ICOs but this should come as no surprise as there has been strongly worded messaging about this for some time.

China bans ICOs and shuts down Exchanges
This had a massive impact on the valuations of coins such as Bitcoin, Litecoin, Etherum, Dash etc.. but things have since recovered since the 2017/09/04 law passed in China but serves as a warning and example of what government intervention can and cannot do.

http://en.people.cn/n3/2017/0904/c90000-9264331.html

Chinese authorities on Monday ordered a ban on Initial Coin Offerings (ICOs), a nascent form of fundraising in which technology start-ups issue their own digital coins, or “tokens”, to investors to access funds as the rapidly expanding market spawned concerns over financial risks.

Starting Monday, ICO activities should be halted, and ICO platforms should not engage in exchange services between fiat currencies, virtual coins and tokens, said a statement from the People’s Bank of China.

South Korea Bans ICOs

The good news is that while ICOs are banned it does not appear that trading in the currencies themselves is banned.
http://www.nasdaq.com/article/south-koreas-ico-ban-a-reaction-to-serious-concerns-over-cryptocurrency-investment-practices-cm854236

In fact it appears South Korea plans to allow trading but wants more regulation and safeguards:

South Korea Makes it Legal to Transfer Cryptocurrencies Internationally

Singapore

Although not by law, many companies in Singapore dealing in cryptocurrency have had their accounts closed:

https://www.out-law.com/en/articles/2017/september/singapore-banks-closing-accounts-of-cryptocurrency-firms/

Countries subject to strict or promising strict regulations

Nearly every country has taken a similar line where they are making a legal framework and claiming that ICOs are subject to the same laws and rules as IPOs. However this doesn’t appear to have been translated into law. It also doesn’t address the question of how holders on the coins will be impacted but one would guess that in the future they may be subject to capital gains tax and treated like traditional stock investments.

This list of countries includes:
EU, Hong Kong, Canada, Singapore and many other countries around the world.

Hong Kong Regulators Warn ICO Tokens May be Securities Under the Law

SEC: ICO Tokens Like Those of The DAO are Securities Subject to Regulations

Canadian Regulators Say Cryptocurrency ICO/ITO May be Subject to Securities Law

Is the regulation valid, practical and legal?

This is a hard call for me to understand in the sense that these cryptocurrencies are just that, digital currency and currently people are not taxed or penalized for simply exchanging, buying and/or holding different currencies.

It may also be interesting to see what the large exchanges, businesses and users do in response such as unprecedented regulation and laws. It may be that some of the regulations and laws imposed around the world may be found invalid or unenforceable in the end.

What are your thoughts and as always please let me know if I’ve missed any new developments around the laws of cryptocurrency.