CryptoCompare Report Reveals Only 16% of Cryptocurrencies Are Decentralized
Report Shows That Just 16% Of Cryptocurrencies Are Decentralized
According to a new report released by CryptoCompare, the majority of the virtual currencies and blockchain projects are still very centralized. The company released the annual Cryptoasset Taxonomy Report and they see that just 16 percent of cryptocurrencies are fully decentralized.
This investigation suggests that the remaining cryptocurrencies and tokens are semi-centralized or fully centralized. That means that those development teams behind these virtual currencies and projects can certainly influence the protocol underlying asset, which is clearly not positive for the crypto space.
Although the world of virtual currencies started with Bitcoin and its decentralization plans, other projects and companies have focused on centralizing their operations. This is quite surprising since the whole space is talking about the benefits of full decentralization rather than centralized systems.
The study shows that the trend is driven by new utility tokens that run on private servers. And indeed, just 9 percent of these tokens are considered decentralized. Cryptocurrencies such as Bitcoin (BTC), Stellar (XLM) and Litecoin (LTC) are considered decentralized.
Tokens that were born from Initial Coin Offerings (ICOs) are just 7% decentralized and are, most of them, considered securities using the standards provided by the Swiss Financial market Supervisory Authority (FINMA).
According to a U.S. district court judge, Bitcoin is considered a commodity. This is similar to what Jay Clayton, chair of the U.S. Securities and Exchange Commission (SEC) said about Ethereum. In the past, Ethereum was a security that became a decentralized asset.
One of the most centralized assets is XRP, which is used by Ripple and other companies. And indeed, investors are worried about what regulatory agencies could say about XRP and whether it is considered as a security or not.
Several times, Ripple has explained that XRP is decentralized and that Bitcoin, for example, is centralized since most of the mining plants are located in China. Apparently, 74 percent of Bitcoin’s hash power comes from Chinese mining pools.
The crypto community and developers would have to make a better effort in order to improve decentralization.