Revisiting crypto’s inception
The origin story of crypto as an industry has intrigued me ever since I came in touch with it in 2017. Both as a retail market participant, as well as someone who works behind the scenes.
Bitcoin remain the “gold standard” within the industry as the ultimate store of value, digital gold, immutable money, whatever your view on it is. That decentralized, peer-to-peer, immutable network called Bitcoin, slowly expanded into a vast ecosystem of innovations that leverage blockchain technology.
Nowadays, we have platforms such as pumpfun, hyperliquid, gacha platforms, token launchers, memecoins, tokenized stocks, predictions platforms. On top of that, there is a version of each of these examples that also incorporates leverage or memetics.
The endless gamblification and memetics make us forget where the industry came from, and what its main ethos is:
Decentralization
The goal, in my opinion, is to build upon Satoshi’s vision, and usher in a new era of distributed, decentralized networks and systems. It’s about widespread ownership, instead of a central entity owning being the gatekeeper. Breaking down barriers.
Creating transparency where it is appropriate. Ensuring true privacy where it is wanted.
How decentralized is crypto?
If decentralization is the goal, how decentralized is this industry currently? Have we done a good job at truly breaking down barriers? While we’ve come a long way, there are still many roadblocks and gatekeepers in the industry.
Layer 2 networks
Consider the average layer 2 experience, which is usually still controlled by a central entity. The power to verify, order, batch, and subsequently post user transactions to the L1, is solely controlled by the company who built the network. Censorship is possible.
Given that a large portion of transactional activity happens on L2’s these days, I’d say this is a problem that needs to be addressed sooner rather than later.
The good news is that numerous teams are attempting to ship out decentralized/shared sequencer solutions.
The bad news? Market participants seem to not care enough about this problem. Leaving no urgency among the big L2’s to fix this problem any time soon.
Stablecoins
When speaking of decentralization, we can’t ignore the giants in the industry such as Tether and Circle. And, of course, their flagship product: stablecoins.
Both of these insitutions, through their respective stablecoins USDT and USDC, facilitate the vast majority of stablecoin volume. They offer an extremely important service. But it comes with asterisks. Both of these entities have the ability to freeze or zero out the stablecoin balance inside of your own wallet. Or to blacklist your wallet address. To play devil’s advocate, this is usually done for non-sinister reasons. For example, when smart contracts get hacked and funds get stolen, Tether may attempt to save the funds by blacklisting wallets tied to the hacker.
Infrastructure
L2’s are super centralized. L1’s less so, although it really depends on the network. The majority of L1’s are still quite centralized. Most have a limited validator set, which is mostly hand-picked across a closed network of the same entities that run on all major networks. This comes from a guy who tried to infiltrate said network.
Don’t forget about RPC infrastructure. Users usually do not use their own hardware to run nodes. Chain interactions are done through a select number of RPC providers that functions as the middleman between the user and the network.
Many invisible chokepoints are present. And most don’t know about them until somethings breaks.