Bitcoin and the entire cryptocurrency ecosystem is the only true free market that exists. These systems cannot be shut down because the underlying technology is decentralized. What this means is that the networks are distributed amongst many computers, so there is no single point of failure to stop them.
5 Reasons Why Cryptocurrencies are Decentralized
- Bitcoin and most its successors are coded on open-source software: Anyone can create their own money and financial network.
- Cryptocurrencies operate on peer-to-peer networks: Many individual users help manage and secure these systems.
- These networks are secured by strong cryptography: The encryption can’t be broken by anyone.
- Miners secure transactions on the ledger: The ledger is constantly moving forward so that transactions can’t be reversed or changed.
- Decentralized governance models have a balance of power : A truly decentralized network has no concentration of power.
The Cryptocurrency Ecosystem
No single entity has control over a decentralized system. Power is generally shared amongst all the participants in the ecosystem.
- Developers: The source code is open which means that anyone with programming abilities can participate in improving the protocols. Anyone who disagrees with a model can simply fork the code to create their own version.
- Node Operators: Participants are free to run the software and keep a history of the entire network.
- Miners: People help secure transactions on the ledger by contributing computer power to the network.
- Exchanges: Entrepreneurs create a market for these currencies by operating exchanges.
- Traders: Traders provide liquidity and help set the price of each cryptocurrency.
- Merchants: They add utility to cryptocurrencies by offering goods and services in exchange for them.
- Marketers: They’re on the front lines helping to boost user adoption.
- Users: Individual users can participate in the ecosystem at any level.
A Balance of Power
Every player in this game contributes to the rules and there are voluntary checks and balances that make the system whole. Money is simply a medium of exchange and its value is derived from the faith of its participants. There is no currency without a community. The more people who participate, the more powerful the network becomes.
In the event that centralized bad actors try to dominate a decentralized system, each participant has some power to influence the outcome.
- Developers: Programmers have the power to alter the software. They can change the algorithm to stop an attack from the miners.
- Node operators: The rules of the network are determined by nodes. People running a node can refuse to upgrade their software if they don’t like new implementations from the developers.
- Miners: Miners can vote by pointing their hashing power to another version of network. The blockchain with the most hashing power usually remains the dominant choice.
- Exchanges: They can refuse to list a coin and make it difficult for it to have a market.
- Traders: They can crash the price in protest or withdraw liquidity out of the markets.
- Merchants: They can stop accepting a coin for goods and services which will diminish its utility.
- Marketers: They have the power to expose corruption and sway public opinion.
- Users: Individuals have the power of choice. Users can boycott a blockchain that they disagree with.
The power of individual choice is the main difference between centralized and decentralized systems. Although democracies tend to be more free than other forms of government, they’re still centralized and individuals can be oppressed by the tyranny of the majority.
Just because the majority of people agree to something doesn’t mean that it’s right or ethical. The population of Europe once agreed that the world was flat and that anyone who opposed this view was a blasphemous heretic.
Decentralized systems are completely based on voluntary choices. Individuals who disagree with the decisions made by the majority are free to withdraw their support and focus their energy elsewhere.
Those who disagree and boycott the majority rule in a centralized democracy are often subject to coercion and violence.
The rule of law exists to protect individuals from harm and to ensure our liberty so that we can all function as a society. At its roots, the only true law we need for a harmonious civilization is…
“The freedom to do whatever you choose just as long as you don’t harm or impede on another individual’s choice to do the same”.
Voluntary choice is a necessary ingredient for a free and open society. Top down governments often restrict our choices in life and sell us on their systems through fear.
Empowering Individuals with Technology
Technology often acts as a great equalizing force to help offset the effects of centralization. Technology is neutral and can be used to oppress or liberate.
Social media can be used as a mass surveillance system to monitor and censor individuals. It can also be used for sousveillance where individuals and whistle-blowers can expose the actions of the state.
Bitcoin and other types of blockchains offer individuals an alternative to the legacy system. For the first time in history we have a decentralized global monetary network. These voluntary public ledgers operate independent from governments and banks.
Instead of waiting and appealing to centralized authorities, we are creating our own solutions through practical application. Satoshi Nakamoto and the cypherpunks never asked for permission to build these systems.
The old way of governance may become obsolete and real solutions must be permisionless and grassroots. Bitcoin is disruptive technology that was never meant to appeal to authority.
Over the years the message of Bitcoin has been diluted with tales of “cheap fees” and “frictionless transactions”. While these are still benefits, they are not the main purpose of Bitcoin…
A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution.
Technology Can’t Protect Us From Ourselves
Although decentralized blockchain technology gives us voluntary choices, the ecosystem is still driven by human nature. Often users will band together under their coin of choice and compete fiercely against other communities.
Sometimes communities are divided over a hard fork and the issue can become political. Speak your opinion on any of the social forums and you’re bound to get someone trolling you with a snarky rebuttal.
When we hide behind our computers in the comfort of our own homes it becomes easy to disrespect complete strangers because we don’t face the consequences. Many people lack social tact and emotional intelligence when interacting anonymously on public forums.
The crypto community is still relatively small and when we disrespect others we prove that we’re not aware and responsible enough to govern ourselves. Smart contracts will never solve the problems of ignorant people.
Learn to practice self-control or you will always be controlled by someone else. We must take responsibility for our words and actions because they have consequences.
Regardless of our affiliations to a particular flavour of blockchain, we should celebrate everyone’s ability to fork the code and create whatever model they want. Decentralization is more than just node operators and miners, its power derives from open-source software and our ability to use it as we see fit.
When we fight against other coins or versions of the software we are attacking the very nature of decentralization and individual choice. As a crypto community we should stop eating our own and focus our attention on the real problem: centralization.