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

Monero lost more than 50% of its network hash rate

This is old news to many but I’ve been watching it, the hash rate on Monero was just over 1000 MH/s prior to the algorithm update as a way to combat ASIC mining by companies like Bitmain.  It plunged to as a little as 157MH/s initially but as of now (2018-08-08) 461 MH/s.

Monero-Hash-Rate-460Mhs-2018-08-09

This is significant and the move wasn’t without controversy but I think it was the right way to go.  Monero wanted to stop giant mining farms like you see for Bitcoin and Litecoin.

I think it worked, initially and clearly a lot of mining was disrupted because all the mining software had to be updated such as xmr-stak or xmrig etc.. Today if you use a pre April 2018 miner you will get “invalid results” or “share not accepted” from the pool because the algorithm has changed.  This effectively bricked Bitmain’s Monero miners but all was not lost for them as it is believed they were probably mining with them for several months if not more before releasing them publicly.  For any critics at least Monero clearly communicated almost immediately after Bitmain’s announcement that they would update the algorithm and would be sure to brick them.  And in all fairness at least Bitmain warned of this on their own sales page so it is nice to see an issue like this handled well by the main parties involved (of course those who still bought a Monero miner are out of their money).

Considering that months later the old hash rate of 1+ GH/s is now only about 460MH/s I think it is fair to say there were ASIC mining farms controlling over half of Monero!  This very well could have been Bitmain and other manufacturers themselves.  But going back to the whole mining thing, most know I am against it.  One inherent vulnerability of any mineable coin is that whoever has the most hashing power wins or controls the network allowing them to steal from others essentially.  As illustrated in my picture earlier one pool supportxmr.com has 80 MH/s, Nanopool 95MH/s, minexmr 94 MH/s so essentially 3 pools control about 60% of the hashing rate or about 20% each on average.  If you check out the list of Monero pools essentially the hash rate is concentrated among numerous pools which puts it in a similar situation as Bitcoin in a sense.

The current situation is better but nothing stops people from spending millions on GPUs and CPUs in order to dominate the network. With Monero only worth around $100 USD at the moment there is little incentive to do so unless an organization simply wanted to kill Monero.  I would imagine criminal organizations like the ones who targeted Bitcoin Gold and other coins will be ready and waiting to do the same though.

What do you think?

Cheers,
A. Yasir