In a submission to the Diar publication, Dogecoin creator Jackson Palmer has outlined some of the concerning trends that are taking place in the DLT industry, most notably that people are completely forgetting that the DLT industry was designed to replace the current infrastructure, not integrate into it. Dogecoin was created in December 2013 as a joke but quickly developed a strong community. The Dogecoin creator writes that –
“As a movement previously described as “the real Occupy Wall Street”, cryptocurrency now sadly resembles a community that instead wants to be occupied by Wall Street itself”
Three pillars of DLT being eroded
Palmer notes the three fundamental tenets of DLT as being trustless, verifiable, and censorship-resistant. But with the ‘advances’ in the cryptocurrency industry, these three tenets are being rendered obsolete. If an entity has to get permission from a regulatory authority then that entity is not in a decentralized network, which is self-regulating by its nature. There are many recent examples of this where private and custom blockchains are being introduced, with premined tokens and centralized ownership. The litmus test is always whether or not the technology is decentralized. Centralized solutions are being put forward as an answer to the scams and hacks taking place, but the solution is far worse than the problem. As noted by Jackson –
“The challenge with institutional entry into cryptocurrency is that it tears down all three core value propositions the technology aims to offer. If a user is accessing their account through a centralized website, handing custody of their private keys entirely to a trusted third-party, and is unable to verify a ledger of how their funds are being handled by that third-party, are they really using a cryptocurrency?”
Dogecoin creator believes that cryptocurrency is becoming centralized
Jackson also noted the increasing powers of exchanges such as Coinbase, who are becoming the de facto gatekeepers for the new technology, as well as the rise of crypto custody solutions where the funds are held by a third party – which is nearly always a bank. Many of the new cryptocurrency derivative products which are being cheered on by people in the cryptocurrency community are actually the antithesis to the ethos of the movement. These derivatives are going to be traded mainly by institutions, on centralized exchanges, they are going to be regulated, and they are paper products based on a fractional reserve system. This means that for every one BTC in existence, 100 BTC will exist on the crypto derivative market much like the current fiat system.
The Dogecoin creator also brings in the appropriate term of cryptocurrency ‘re-centralization’, giving stablecoins as an example. Tether is one such coin, refusing an independent audit and owned and issued by a corporation. Circles’ USDC is another, with ties to Goldman Sachs –
“Given the seemingly enthusiastic response of the cryptocurrency user base to what already marks a re-centralization of the technology, I gravely fear that we are heading toward a future where Wall Street bankers control not only the services atop a currency, but centrally issue and manage the currency itself. While this prediction may sound far-fetched, it has already begun with the issuance of highly centralized “stablecoin” crypto-tokens such as USDC managed by corporations like those we’ve already discussed”
Is the DLT Industry dead and buried?
On a very positive note, the DLT industry is thriving. Despite all his misgivings, Palmer is optimistic about the DLT industry and cites the Plasma and Lightning Network as innovations which offer non-custodial scaling solutions. Hardware wallets and privacy coins such as zCash are also mentioned as both empower the user and do not require third-parties.
People who understand how the industry operates simply have to hold on to a basket of solid cryptocurrencies and wait for the fiat complex to cave in on itself. There is daily adoption and integration of cryptocurrencies across the globe. In regions such as Turkey and Venezuela, adoption is being pushed forward due to collapsing fiat economies.
Additionally, it is simply not possible for centralized authorities to gain a stranglehold on the DLT industry, for a myriad of different reasons. One is that there are currently hundreds of thousands of developers working on various pieces of applications and software related to DLT. It is not practicable to legislate for this in any kind of environment (the possible exception to this is China, where the government is planning to track identities on the blockchain, and the citizens do not seem overly alarmed by this proposition). The blockchain industry has proceeded too far and with too much interest to be completely destroyed, despite the vast centralization that is currently taking place.
It is important to understand that cryptocurrency is a grassroots movement where people need to see the validity of cryptocurrencies against fiat money. Every transaction in cryptocurrency is a vote against the fiat complex. The ability to go to a local bar or shop and transact in LTC, BTC, or XMR is much more important than any official regulation, Bitcoin ETF, or stablecoin introduction. DLT is about the decentralization of power, and only acceptance on an individual level is going to bring real global change. Thankfully, this adoption is increasing daily and the future for DLT is brighter than ever.
Digital Nomad with an interest in Zen and Blockchain technology.
Law graduate with 3 years experience as a consultant in the capital markets industry and 4 years experience freelancing on UpWork as a Creative Writer.