As crypto becomes more mainstream, can it stop decentralized?
As crypto becomes more mainstream, can it stay decentralized?
As global markets continue to face downward trends, crypto markets are anticipating greater adoption as people see the digital asset sector as a hedge against inflation (even though some prices are currently down from their 52-week marks).
Whether it’s first-time buyers of cryptocurrency or people learning more about NFTs, Bitcoin and the general crypto ecosystem, there has been an uptick globally in crypto awareness and, in turn, adoption, data indicates.
About half of all crypto owners in the U.S., Latin America, Asia Pacific, Brazil, Hong Kong and India bought digital assets for the first time in 2021, marking a major breakthrough for the nascent industry, according to a Gemini <a href="https://gemini.com/gemini-2022-state-of- crypto-global.pdf” target=”_blank” rel=”noopener”> report. Globally, 41% of individuals surveyed who did not own crypto said they were interested in learning more or buying it in 2022, the report added.
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At the end of 2021, the global crypto market had 295 million users, but that number might reach 1 billion by the end of 2022, based on last year’s rate of growth, according to a report by Crypto.com. But given the current market volatility, with the total crypto market cap <a href="https://coin marketcap.com/charts/” target=”_blank” rel=”noopener”>down 46% on the year to date, it’s uncertain whether that 1 billion mark will be hit within the next six months.
Mainstream adoption amid a decentralized ethos
As crypto becomes more mainstream, regulators worldwide have monitored the space more closely to (they say) protect consumers. Just last week, The Group of Seven, an international political forum of members from the U.S., Canada, France, Germany, Italy, Japan and the United Kingdom, <a href="https://news.bitcoin.com/g7-finance-leaders-call-for-swift-and-comprehensive- crypto-regulation/” target=”_blank” rel=”noopener”>called for swift, consistent and comprehensive regulation of crypto-asset issuers and service providers.
But can crypto truly stay decentralized as governments globally home in on the industry?
Decentralization can mean different things to different people, but most in the web3 community agree that it is one of the key factors to what makes crypto, well, crypto. So as regulators enter the space and begin drawing out frameworks and guidelines, decentralization must remain prominent across the industry if it wants to hold true to the core precepts that it was founded on.
“Decentralization is at the core of the web3 ethos, and it must remain at the core as crypto gets more mainstream adoption,” Wilson Wei, co-founder and CEO of CyberConnect, said to TechCrunch. “For decentralization to remain central to crypto and web3 as a whole, it begins with the infrastructure.”
Decentralization boils down to data ownership, Wei said. The problem with Web 2.0 is that a handful of tech giants like Facebook and Instagram own most of the users‘ data, but in web3, data should not be owned by the platform, he argued: “In order to remain decentralized, we need to ensure that applications are actually building services on top of decentralized infrastructures, which guarantee user data sovereignty.”
This is more of an evolution that will run in parallel and complement one another, Jonathan Schemoul, co-founder and CEO of Aleph.im, said to TechCrunch. “There already are, and will continue to be, decentralized cryptocurrencies and applications that people use and support because of the benefits they provide over centralized options.”
For example, Aave is a decentralized lending protocol that allows users to take out permissionless collateral-backed loans without requiring personal info or KYC/AML (know your customer/anti-money laundering) documentation, Schemoul noted. But in contrast, centralized crypto platforms like BlockFi also enable crypto collateralized loans and operate in a way that is permissioned, more intrusive and less transparent than decentralized alternatives, he added.
A world coexisting with Web 2.0 and web3
In some ways, crypto will remain decentralized while trending toward centralization in others, Schemoul said. “That’s perfectly fine; web3 isn’t going to replace Web 2.0.”
“The ethos is not simply decentralization for decentralization’s sake,” said Kurt Hemecker, COO of Mina Foundation and former head of business operations at Meta’s Diem Association. “On the contrary, the underlying decentralized design is what makes cryptocurrency revolutionary.”