Decentralization is one of the factors in the blockchain scalability trilemma. Typically, being more decentralized is going to hurt scalability. However, it is difficult for a blockchain to reach a high level of decentralization in the first place. There must be sufficient number of people who believe in the project to achieve high decentralization. That is why many newer crypto projects chose to focus on scalability rather than decentralization.
Recently US president Donald Trump tweeted about Bitcoin and Libra. He doesn't like that there are other currencies that may potentially usurp the USD position as the most dominant currency in the world.
So when your boss is not happy, you got to do something. Regulators sprung into action and started their hearing on Libra and at the same time made Bitcoin a common topic. In one of the recent hearings, congressman Patrick McHenry said the following,
“The world that Satoshi Nakamoto, author of the Bitcoin whitepaper, envisioned - and others are building - is an unstoppable force. We should not attempt to deter this innovation. Governments cannot stop this innovation, and those that have tried have already failed."
Here is an extract of the video when he spoke those words,
He went on further to reinforce his point in an interview with CNBC,
Before Facebook proposes the establishment of Libra, cryptocurrencies like Bitcoin were not treated seriously. The US government probably didn't think much about it. However, when Facebook plans to have a new cryptocurrencies, they began to worry. They finally realize such collaboration between large companies is going to threaten the USD and by the same measure, a decentralized currency might have the same impact as well.
The US government wants USD to be the most dominant currency in the world. Having full monopoly on the most dominant currency in the world gives them a huge economical advantage over other countries, especially China. Hence, it is natural to treat both Libra and Bitcoin as enemies.
But between Libra and Bitcoin, which one is easier to be stopped and made an example of? Bitcoin is open and decentralized. Some people in the US Congress already understand that it is difficult, if not impossible, to be stopped. Bitcoin has been around for more than 10 years and no government was able to completely shut it down. On the other hand, Libra, the cryptocurrency proposed by Facebook and other companies, is not going to be decentralized. It is thus easy to shut it down simply by targeting participating companies one by one and imposing fines on them.
I think the US government will eventually embark on a path to regulate Bitcoin and shut down Libra before it is even started. Bitcoin is open and transparent. Though it cannot be stopped, the regulators can still find ways to ensure that they can still detect money laundering activities or other illegal transactions. Given the recent privacy scandals Facebook is involved in, the US government is not going to let them start a cryptocurrency so easily. Even if it can continue, it is likely to be over-regulated in a manner that it is no longer meaningful to launch it.
I think this whole saga simply emphasizes the importance of decentralization. When buying a cryptocurrency, where its main purpose is for transferring of value, decentralization is the most important aspect. Cryptocurrencies are expected to go on a long battle with regulators over the world. Those that are centralized can be easily shutdown and cease to exist. Only projects with sufficient decentralization will survive and co-exist with fiat currencies in the long run.
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