Is Crypto really Decentralized?

By the Coinscope Team·23 Nov 2021·
Is Crypto really Decentralized?

Whenever we talk about crypto, we definitely come across the word decentralized.

But is it really decentralized?

Why does decentralization matter?

Let's first understand what decentralization means.

What is the meaning of decentralized?

Wikipedia says, "Decentralization is a process by which the activities of an organization, particularly those regarding planning and decision-making, are distributed or delegated away from a central, authoritative location or group."

So decentralization is basically the distribution of authority.

It's all about minimizing the authority of only one person to avoid any single point of failure.

Is decentralized good for crypto?

Minimizing the chances of failure is a good thing, but it's not the only factor that we should consider.

Let's take an example of a decentralized organization where everyone shares the authority and responsibility, and there is no point in failure. This sounds great on paper but will fail miserably in the real world as you can't possibly get every single person to contribute all the time.

Crypto is not trying to be an organization; it's a technology.

The goal of this cryptocurrency is to enable peer-to-peer transactions without any third-party intervention, which means no centralized authority.

This makes sense in most cases because if there was some centralization, for example, all your money would go into someone else's pocket, then it can be manipulated and scammed.

Another good example is the internet. I think we all agree on this that no single point of failure is a great thing here, too, right?

So decentralization sounds like a good option to avoid such situations, but there's more than just one factor we should consider while choosing between decentralization and centralization.

Let's take a look at some of the factors which we should consider before making any decision:

Number of Users:

If we consider something like Google, YouTube, or Facebook, for example, then there are literally billions of users. So if anyone wanted to shut them down, they would need to invest lots of money and time, which is practically impossible.

But it's totally different in the case of cryptocurrencies.

Crypto transactions are done between two users only, so if someone wanted to shut down any cryptocurrency, then they would just need to make a 51% attack on that particular coin. This can be done with less than $10M, which makes it a very easy task.

Number of Developers:

Many cryptocurrencies don't have a proper team working on them, and not everyone can become a developer.

Big coins like Bitcoin and Ethereum have thousands of developers working on them, and it's not easy for anyone to stop them from improving or updating their technology.

But in the case of other cryptocurrencies, there will only be 1-2 developers who won't be enough to secure the system if someone is trying to shut it down.


Let's take the example of Bitcoin for a moment here; if anyone wanted to shut it down, they would need to invest at least $70 billion, which is essentially impossible.

And even after successfully taking over the network, they won't be able to do anything with that money because there will always be someone who could easily take it over again.

But what if the investment is only $10-20 million? This can be enough to get 51% control of a smaller altcoin, and once they have that power, they can do anything with your money.

No Involvement of banks

There's no bank involvement, so transactions are very quick, and it's impossible to forge the transaction history.

Every transaction is stored on a public ledger, so you can always see what's going on in the network. All these features make Bitcoin a safe choice for investors who don't actually want a bank to take a cut from their profits while investing in cryptocurrencies.

Then other financial institutions make the transactions very fast and cheap.


Since we know that decentralization is a good thing for cryptocurrencies, then why not go all the way, right?

Many altcoins are not transparent at all, so anyone can use them for illegal activities without leaving any trace.

But big coins like Bitcoin and Ethereum are very transparent because their transactions are publicly listed on the blockchain, which makes it harder to use them for anything illegal.


For example, Ethereum is planning to implement a Casper technology that will solve the scalability problem and make transactions faster and cheaper.

But smaller altcoins don't have this option, so they're quite insecure to use as compared to Bitcoin.

No Government involvement

There's no government involvement in Crypto trade which makes it completely decentralized and secure too!

If we consider everything, then we can clearly see that cryptocurrencies are much better than fiat currencies, and they're not as centralized as many people think.

But decentralization is just one aspect of cryptocurrency, and there are other factors that need to be considered before making any decision.

Decentralization Matter
Decentralization Matter

Why does decentralization matter?

The main goal of decentralization is to avoid being controlled by a single person or a group, making it a very good option.

But you need to understand that no technology is perfect, and nothing comes without any cons. A decentralized system has its own cons too, let's take a look at some of the pros and cons of decentralization:


No single point of failure, so it's secure.

If you have a lot of coins, then no government can ever confiscate them unless they pass a law that bans cryptocurrencies.

You don't need to trust anyone, just keep your money with yourself and use it whenever you want. No third-party involvement is required.

People are in control of their money because no one can ever freeze your account or steal the money from you.


If you have a weak internet connection, then it might be hard for you to use cryptocurrencies.

It's just not feasible in many cases; you would need lots of storage space and bandwidth to run a full node.

Centralization makes it easy for people to access services, but decentralization can be a problem in some countries where the internet is not reliable.

I think the best way to decide whether you should choose decentralization or centralization is by considering what's more important to you.

By the Coinscope Team·23 Nov 2021·

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