In his article, Palmer describes how there has been a great enthusiasm for the entry of large companies in the cryptic field, such as the Bakkt cryptocurrency platform of Intercontinental Exchange (ICE) or Fidelity Investments which opens a cryptographic negotiating desk. To compete with the entry of these large institutions, start-ups born in the field of cryptocurrency are leading their companies on the path of institutional investors.
Palmer criticizes this direction and urges people to step back and see this move in the grand scheme of things.
Discuss the three main advantages offered by traditional cryptocurrency. He states that these are:
- Resistance to censorship
- Transactions without trust
- Verifiable history
Resistance to censorship refers to a user's ability to interact with a currency without relying on a single point that may fail. The blockchain technology inherent in cryptocurrency ensures this resistance to censorship. Because of its decentralized nature, no single entity can censor transactions between a user and the digital ledger.
Palmer emphasizes that relying on entities like Coinbase or a bank to act as an exchange creates a clear point of possible failure. If the entity were to shut down or block customers from their accounts, users would not be able to access their cryptocurrencies.
Transactions without problems refer to the full control that cryptocurrency holders should have on their funds. They should be able to make transactions securely and reliably without having to rely on another entity. This is made possible by the nature of the cryptocurrency.
When one says that a person possesses cryptocurrency, what he actually possesses is a ledger of transactions that prove that they are the owners of a certain amount of value. Because the system is hosted on a decentralized ledger, users can transact with each other transparently and securely.
Palmer discusses how the practice of allowing companies like Coincheck to control and manage the user's cryptographic portfolios in the name of convenience is antithetical to transactions without trust. When traders are transacting on an exchange network or a company, they are simply allowing the supplier to move their balance sheets to a centralized database.
Furthermore, large sums of cryptocurrency held in a central location lead to a loss of security. The Coincheck robbery and the Mt.Gox disaster are two examples.
Verifiable history it simply refers to a user's ability to verify the entire transaction history that leads to the current state of the ledger balances. This transparency allows greater confidence in the currency itself. Palmer argues that much of Bitcoin's original success was fueled by the lack of transparency of the banks, which led to the 2008 economic crisis in America.
Palmer explains how large sums of cryptocurrency are now starting to be held in institutional service providers that hold their own private blockchain networks. While this presumably leads to higher speed and lower transaction costs, it completely removes the cryptocurrency initially offered.
With the three "tenants" of cryptocurrency that are subverted for speed and lower costs, Palmer fears that large institutions acquire the monopoly of the great cryptocurrencies. He states that "for a movement previously described as "the real Occupy Wall Street", the cryptocurrency sadly resembles a community that instead wants to be occupied by Wall Street ".
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