The ideas of liberty and Decentralization were the ideas of freedom which first came into existence during the 20th century. The ideas originated among the few people who had the courage to challenge state politics. They called themselves decentralists.
I would like to ask you what Freedom means to you? Just a word to express your free status in society or is it more than that? The question is what do you want to be free from? Is it the boundaries that are holding you from expressing yourself for centuries or is it the society which is being setup by a few powerful anti anarchists who call themselves leaders?
Look around and ask yourself are you free? Are you free from regulations that govern you? Are you free to spend your money that you made dragging your ass whole day around the corners of this system?
If you have the answer, then you are not free. Freedom was coined to express the idea of Decentralization that is free from governing bodies, the idea of free society in which power is distributed among us, we the people.
The world you see around is independent, you get the choice to elect your leaders to govern the society, to run the country but is that decentralization? At the end of the system there are state or privately controlled banks governing how you spend your earned money.
What if we get the chance to remove banks from the system? Some of you might argue that this society can’t work without a central authority to control money flow. What if I answer, it is possible to achieve complete freedom, complete decentralization?
Disclaimer – I am not drunk while writing this, this article might seem drunk decentralist to some but I am trying to share my views of this society because my ancestors earned the Right to Express from the state for me.
This is how it works, you participate in elections of your state to elect the government with the motive to run the state and to maintain the rights of the society. The same state also has a major function that is to run state banks, which are state owned. The major role of those banks are to keep an eye on the money flow i.e. to keep a check on assets transfer or exchange via fiat currencies. Those banks also charge you some amount of your money as transaction fee in the name of maintaining the system.
What if I get the option not to involve the banks and perform peer-to-peer i.e. direct transfer of assets or exchange?
Cryptocurrencies are making it possible.
The idea that is reshaping the society for betterment, a society void of central authority, completely decentralized.
Cryptocurrencies are digital currencies that inherit the properties of blockchain technology and can be used as fiat currencies for transfer of assets or practically anything.
You can use cryptocurrency exchanges to exchange or transfer currencies without involving your bank or paying outrageous fee in the name of transaction charges.
Stop there! Read the previous sentence again I mentioned exchanges. Your brain should have asked you by now who runs these exchanges, aren’t they other form of banks.
Before I come to the important part look at the list below.
Binance https://www.binance.com/
Bitmex https://www.bitmex.com
Bitfinex https://www.bitfinex.com/
Bittrex https://bittrex.com/
Poloniex https://poloniex.com/
Bibox https://www.bibox.com/
District0x https://district0x.io/
Altcoin.io https://altcoin.io/
Airswap.io https://www.airswap.io/
Omega.one https://omega.one/
0x Project https://0xproject.com/
Bisq Network https://bisq.network/
Kyber Network https://kyber.network/
Binance BNB Token https://www.binance.com/resources/ico/Binance_WhitePaper_en.pdf
Note- All exchanges listed above have been used by me. There is a long list of centralized exchanges using them is subject of choice. I don’t recommend or promote any exchange. Few listed decentralized exchanges are still under the development phase.
Since the beginning of cryptocurrencies, exchanges exist all together in this global structure of cryptocurrencies. So what is the role of these exchanges? Like any other economic structure there has to be a medium that allows users to perform transactions or exchange assets.
Above listed centralized institutions are few examples of such structures that allow users to transact or exchange currencies and in return they charge transaction fees to provide and maintain the infrastructure.
Yes! you can think of these exchanges as the same as modern banks which act as a medium of daily cryptocurrencies transfer. They also play a very important role in deciding the price of cryptocurrencies that completely depends on liquidity and volume of cryptocurrencies in a particular exchange. What might strike you as strange is that you will notice that different exchanges will have different prices for the same cryptocurrency.
At the end these exchanges also have to work according to their native country laws, now think of a situation in which you have the option to buy cryptocurrency BITCOIN (BTC) from a particular exchange. Look at the situation below.
NOTE- It is very important to remember that the prices of cryptocurrencies are volatile they have a price because we people believe that they have a price, cryptocurrencies are not backed up by any physical resource, few exceptions are there like Tether (USDT) *Backed up by U.S dollar.
At the beginning when the structure of cryptocurrency was designed I understood that Miners will verify the transactions in the system in return they will get bitcoins as reward, which can be added again into the system against fiat to increase the volume. But now the situation is different many of these exchanges act as brokers, with the increase in demand they have full control to halt trade or to bulk buy cryptocurrency, now in the situation where you have the option to buy cryptocurrency from only one particular exchange you eventually have to pay more price for your purchase or exchange.
These exchanges act as central authority to control or govern the flow of cryptocurrencies with full control over trade which is a huge problem in this decentralized world of cryptocurrencies.
With full control over trade and volume of cryptocurrencies what if these exchanges jeopardise security. It has happened in the past.
There is a long list of these hacks that took away millions.
o March 2014- Mt. Gox
Once upon a time there was a giant named Mt Gox, it was the largest bitcoin exchange and till date the most infamous. In total about $473 million worth of bitcoins was stolen from exchange over several years. It was a nuclear disaster in the world of cryptocurrencies, even after declaring bankruptcy and protection against creditors in February 2014, it is still haunting the cryptocurrency world.
o January 2015- Bitstamp exchange
Within a year of Mt Gox disaster another exchange lost $5.1 million when one of its administrator of hot wallet, downloaded a file from a phishing source.
o August 2016 – Bitfinex
On august 2, 2016 Bitfinex announced the security breach in their multi signature withdrawal system in which they collaborated with another company called Bit-go to sign the transactions before complete closure. Hackers managed to hack into bitfinex servers where they stole $66 million worth of Bitcoin from their hot wallets. In this vulnerability hackers managed to make Bit-go co-sign illegal withdrawals.
o January 2018 – Coincheck
The Japanese giant became a victim and lost $530 million in hack, biggest in the history of cryptocurrency. Coincheck kept currencies in their hot wallets which were connected to external networks. At the end coincheck managed to refund users using their own funds.
The whole point of mentioning this is to grab your attention towards the centralized structure of these exchanges that are being handled by central servers and security breaches that can cause loss in millions, billions even. Also centrally governed structures cause manipulation in the cryptocurrency world.
Tether (USDT) is famous due to its links with the major cryptocurrency exchange Bitfinex. They came into news lately when Unites states regulators Subpoenaed Bitfinex and Tether. Know the complete story here.
I became an addict for the change because I believe that blockchain and cryptocurrencies can bring change in this society and can free us from financial slavery.
Believe it we all are victims of this fraud, that financial institutions and banks forged using our vulnerability to follow the system.
The whole idea of decentralized exchanges is to enable peer- to peer transactions. User to user ability to transfer funds. What confuses me is that if I need to pay someone why would I have to involve a 3rd party to process my transaction? I can pay directly. The same idea can be used to create a complete decentralized system in which no 3rd party will be involved to process transactions.
The debate is that centralized exchanges form rigid structures and create a platform for multi level trading that can be a challenge in decentralized exchanges. But, decentralized exchanges come with many benefits.
1- Full control over funds- Only the end user will be in control of funds as no central authority is involved.
2- If there are no central managing bodies hacks can be minimised to zero.
3- There will be no risk to server or downtime.
There are many exchanges that are active and completely decentralized and many more are under development.
Now I ask you what do you think should be the future? In the world of cryptocurrencies and blockchain would you like to get rid of this financial slavery? Would you take the stand and contribute to the system that will be free of any central authority? Be the future – Decentralized.
