I had to scroll past far too many hot takes about how centralized exchanges signal the end of decentralization before finally finding someone saying this.
There is a decentralized version of every service that Coinbase currently provides and many more they don't, with the exception of fiat on/off-ramps. Until regulations change that's going to mean centralized entities that cooperate with the existing financial institutions.
That fact alone does not invalidate the significant progress being made in every other part of this space with regard to decentralization. Once my USD are converted to crypto I can leave Coinbase and fully engage with the decentralized ecosystem, only going back to a custodian like Coinbase if/when I want to return to USD or other fiats.
Coinbase also doesn't pretend to be decentralized and the bank analogy holds pretty well for them.
I'm not sure it's meaningful to say cryptocurrencies are decentralized. Decentralization is more of a social phenomenon than technical, e.g. cash is decentralized but socially we've found advantages to centralize.
While coinbase (and other exchanges) is centralised, in what way does it mean that idea of bitcoin being decentralised is lost?
It's still independent from banks (and pretty much anyone, as designed). I'm not sure if anyone expected bitcoin to succeed without places like coinbase. They still don't control (and never will) emission of bitcoin and you still have an option to trade it however you like.
It's quite obvious that for years that crypto has geared towards more centralization and it always has been like that and it certainly includes both Bitcoin and Ethereum which have become centralization. There is no true decentralized aspect about crypto.
> I think that Coinbase does understand decentralization and knew Solana was centralized, so listing a centralized coin shows that they're not committed to decentralization.
Why exactly would a centralized crypto exchange care about decentralization?
It has always been a buzzword to get crypto maxis to HODL at high prices and traders, crypto exchanges and VCs to dump on retail.
Except if you go for decentralized exchanges, that sidesteps regulation and KYC/AML entirely. If countries keep fragmenting their crypto regulations, then so will liquidity. The decentralized exchanges will be the only venues left that pool liquidity at a global scale.
You still need a centralized exchange to be an on-ramp to go from regular money to the blockchain. But that's way less lucrative. You convert your dollars to USDT/WBTC/Ethereum at Coinbase, transfer to your wallet, then do 99% of trading/gambling on Uniswap. That's not a future where Coinbase is very valuable.
I don't think I said Coinbase should be committed to decentralization. What I will say is more nuanced: if Coinbase and other exchanges aren't committed to decentralization, then you and I have good reason to distrust those exchanges' motives.
From the perspective of an individual investor in cryptocurrencies, decentralization is the entire benefit of cryptocurrencies.
Hacker News isn't a place where this will be popular to say this, but some regulations are good--they exist to protect from scams and obvious economic flaws.
Some regulations are misguided too. Decentralized currencies by their unregulatable nature avoid all regulations: good regulations and bad regulations. If you have reason to avoid the bad regulations, then cryptocurrencies are a good investment for you.
A centralized cryptocurrency is the worst of both worlds. It's (temporarily) unregulated, but it's not unregulatable. That means that investors don't get the benefits of avoiding the bad regulations, because in the long run, centralized cryptocurrencies can be brought into the regulation fold. But it also means that investors don't get the benefit of good regulations, because a scammer can exit long before their crypto gets regulated.
That's a pretty high-level, general view, but this plays out in a lot of specific ways, including what has happened with FTX.
Bitcoin is both distributed and decentralized. In a world with 100 people, you can say that a system is sufficiently 'decentralized' if 10 of the people ran nodes, independent of eachother, where if any of the nodes lied or crashed the system would continue to work, and where few or no nodes collude with each other. It doesn't require every single one of the 100 people to hold the blockchain.
Bitcoin nodes is a bit like peer review of a dozen academics keeping each other in check, only it's based on math and cryptography and proof of work. The proof of work ensures it's not possible to lie to other nodes without expending lots of money on mining and risking not getting any reward in return when your blocks are rejected. And even if you lie, nodes can't send money they don't earn due to the public-key cryptography. And instead there are hundreds or even thousands of such nodes and miners, and we call that decentralized.
In other words you can run a decentralized system with thousands of copies of all transactions, as opposed to all 7 billion people needing to store a copy and relay every transaction to everyone else.
Beyond that, not all transactions need to even be stored by the nodes that are needed. If you sent me a dollar in 1990 and I spent that dollar, and whoever received it from me spent it and so on tens of thousands of times now in the past 25 years, then there's absolutely no practical reason for me to store the data on our transaction in 1990. It can be pruned. And so can all the transactions between 1990 and 2014, and most transactions in 2015 of that particular dollar, except the last recent few.
Concerning security of the blockchain the vast majority (an ever growing number) of transaction data can be safely thrown away.
Some research universities and businesses might save that data for posterity/research/datamining, but for the network to operate, to function, you can prune something like 99% of the data.
What exactly does decentralization offer considering all governments are centralized?
The Holy Grail of crypto seems to be some sort of dream of a fully decentralized society without banks or governments.
What if that doesn't happen? There's no reason to assume that even if crypto wins, banks or governments go away. My personal bet is that governments (and probably banks, too) will be around long after cryptocurrencies go away.
What exactly are we winning? Practical stuff, not ideology.
An inconvenient truth in the golden age of crypto mania. Even crypto itself cannot put up a good fight against centralization, as companies like Bitmain and Coinbase dominate the landscape.
Decentralized protocols and centralized services on top of those protocols is the future.
> Attempts to make things decentralized all seem to be aggregating into central controls, i.e. "Web3/crypto" -> coinbase, kraken, etc
Coinbase and Kraken are not "central controls" as you not only can use either and they are exactly fully interchangeable, but you can use any number of other similar services--or even deal directly with another user and keep your credentials locally--all of which are exactly fully interchangeable.
> I imagine it won't be long before Coinbase, for example, will warn you against transferring to wallets which aren't held by one of the big providers.
Perhaps, but I'm not sure if that answers my question.
Cryptocurrency networks are decentralized on their own, but I'd say the way we generally interact with them is not. It sounds like we agree on this point.
However, whether a decentralized system is accessed through a centralized layer or vice verse, the result is a service that is not fully decentralized. If any entity, such as a bank, third-party banking service provider, cryptocurrency exchange, etc., is involved at any point, that entity effectively has some control over what happens on the associated decentralized system. This results in an at least _partially_ centralized system.
Coinbase, Binance, Tether are a problem to decentralization. They are far more centralized than the fiat alternative. Imagine if the stock exchanges, brokerages, payment processor, private and commercial banks were all controlled by one or two companies.
The success of these centralized exchanges ought to give anyone pause with regards to how truly decentralization crypto really is.
Regardless, defi exchange won’t stop monetary expansion. People with a currency will want to gain a return on those currencies, since they don’t do anything productive sitting in a wallet. Therefore, banks would emerge with deposit accounts who would then lend out loans in excess of deposits. I don’t see a defi way of doing that which would replace institutional banking, because individuals and algorithms are not equipped or financed to analyze the lending risks, fraud, take legal actions, etc..
I still have trouble understanding how a system designed to facilitate global consensus can be considered decentralized. Sure maybe the hardware is decentralized but the resulting data structure is just like the centralized systems it aims to replace. Call me when your cryptocurrency is offline first.
No, not all cryptocurrencies are decentralized. There's nothing about a blockchain that requires decentralization. It's a key tenet of some of the coins, but not all.
There is a decentralized version of every service that Coinbase currently provides and many more they don't, with the exception of fiat on/off-ramps. Until regulations change that's going to mean centralized entities that cooperate with the existing financial institutions.
That fact alone does not invalidate the significant progress being made in every other part of this space with regard to decentralization. Once my USD are converted to crypto I can leave Coinbase and fully engage with the decentralized ecosystem, only going back to a custodian like Coinbase if/when I want to return to USD or other fiats.
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