Cryptocurrencies

Cryptocurrency Centralisation: Binance

Preface

It’s been a while since I’ve blogged about the altcoins in any sort of detail. The market is such that Bitcoin news continues to dominate the cryptoverse, and rightly so. With altcoin/Bitcoin correlations being as strong as they are, the macroeconomics of the entire cryptospace can and should trump the microeconomics of altcoin sat values.

But a particular question was posed to me this weekend, one which has broader implications for the cryptoverse. And being more ‘altcoin related’ than ‘altcoin specific’, I thought I would share my answer with you. The question was this:

What are Bit Brain’s thoughts on Binance? – specifically with regards to decentralisation.

Here are my thoughts:

Introduction

I think that those of us who are deep into crypto – myself included – suffer from a form of tunnel vision. While many of us have years of crypto experience and knowledge under our belts, we forget that we are but a puny minority.

I had another question this weekend: Visiting the Facebook wall of a friend of a friend, I went through the lengthy process of explaining economic collapse, ending off with my usual “and that’s why Bitcoin is so important”. A reply appeared beneath my comment: “I know nothing about Bitcoin. And what on Earth is a mining farm?”

How does one even start to reply to a question like that? Of course I did my best, but that’s not the point, the point is that I received a stark reminder of just how little the average Joe knows about Bitcoin. He literally just knows the word “Bitcoin” – and probably that it is some form of money.

Why am I telling you this?

Because we often forget just how very new crypto is. I mean: we do know that, but we forget the implications of it. We tend to think of it as a more mature market than what it really is.

With that in mind, let’s look at Binance.

Binance and Centralisation

I am unashamedly a NEO fan. All coins have their fans, but I’m not a NEO fan for the usual “fanboy” reasons. I’m a NEO fan because I looked at ALL the chains, and then asked the question: “which one is best?” (Sorry losers, the correct answer is “NEO”! 😉 ). I don’t say that NEO is the best altcoin because I’m a NEO fan, I’m a NEO fan because NEO is the best altcoin!

But that IS subject to change!

I love computers. My PC has an AMD processor. I love that CPU and am very happy with it. At the time I bought it, it was the best hardware available for the money I had. But my previous processor was an Intel, and I loved it just as much. At the time I bought the Intel, it was the best on the market. So I love my AMD because it is the best at the moment. I’m definitely not just saying it’s the best because it is an AMD or because I bought it. The same principle applies to my mobile phone, and to many other things.

You now have the necessary context to understand the following statement:

I am a fan of CZ and of Binance.

But CZ and Binance are drawing a lot of criticism, and much of it IS valid. How do then I reconcile my “Binance Fan” views with that of a critical reality? Am I simply another apologist? A “fanboy” making excuses for his “shitcoin”? Let’s look deeper…

Decentralisation is one of the founding principles of crypto. I place extremely high value on it and I hate to see it compromised.

But

There are times when it is acceptable to compromise on decentralisation. The standards for what nature and degree of compromise are not industry defined, nor are they even agreed upon. Every man must decide for himself where such lines must be drawn (“mankind” type of man, not “gender” type of man).

Take my favourite low-cap cryptocurrency – the little-known CargoX (CXO). CargoX is NOT decentralised. Sure, it runs on the Ethereum network and its CXO tokens are held by a large number of people, but that’s where it ends. CargoX is pretty much just a standard company, even though its products are based on blockchain tech. The thing is: CargoX needs to be centralised, else its business model would not work. And that’s fine, because at no stage does it purport to be managed in a decentralised manner. Indeed, it needs a centralised structure which can be held accountable by its clients (it operates in the shipping industry and with electronic documentation).

When it comes to crypto exchanges, we all know that fully decentralised DEXs are the gold standard. We also know that such DEXs are rare and that CEXs dominate.

Looking at Binance specifically: we have to accept that CZ is now prioritising business over the principle of decentralisation. This has been coming on for a long time, and probably first became publicly visible when CZ suggested rolling back the BTC chain after the major Binance hack.

It is unfortunate that CZ seems to speak/act first and then think later – as we recently saw when be backed Justin Sun’s “hostile” takeover of STEEM*[1] and then changed his mind later on. The problem with Binance is that is has grown into so much more than just an exchange. It’s now a fully-fledged one-stop crypto solution. Under such circumstances – where business expansion becomes the priority and rapid innovation and management decisions are required – decentralisation is non-optimal and becomes sidelined – to a degree.

Even the Binance DEX draws fire for being “centralised”, a criticism which is not unfounded. But note that such criticism is only partially fair, since the Binance DEX IS a DEX, it’s just that the concepts of “DEX” and “CEX” are not the binary constructs which some mistakenly believe them to be. Instead there is a DEX-CEX continuum, with most “DEXs” lying somewhere in the middle.

Look: I would LOVE to see Binance stick to its core business. I believe that companies perform best when their focus is singular and they stick to doing what they know. However, it is apparent that CZ is intent on Binance expanding and branching out – which is not a bad thing!

Because:

Looking philosophically: the world is NOT ready for decentralisation and for looking after itself! Now, more than ever, we see how the masses have gone “full sheep” in their flat panic reaction to Covid-19. People are BEGGING for their nanny states to tell them what to do! They’re BEGGING for governments to fix their finances – literally begging. They are praising centralised control, even at the cost of complete loss of liberty! Do you really think that this world is ready for full decentralisation?

I’m afraid not!

In light of this, we need to realise that SOMEONE is going to fill the vacancies in crypto. SOMEONE is going to supply that which is demanded by the masses. And what the masses demand is centralised control. Perhaps you came across this Cointelegraph article yesterday: “New Research Says Bitcoin Price Jumps in Response to News of Clear Regulation”.

Clearly there is a centralised crypto gap that is going to be filled, if for no other reason than to satisfy the requirements of institutional investment. So if not CZ and Binance, then who?

Personally I would much rather have Binance fulfilling those needs as opposed to e.g. The Winklevoss Twins or their frenemy: Facebook’s Libra. Unlike non-crypto opportunists coming in from the side to make a buck, CZ is a genuine guy, even if he has compromised his principles to a degree. He remains an intelligent visionary who is genuinely dedicated to crypto. Coming from me, that’s about as high as praise gets. Bit Brain does not use the words “intelligent” or “visionary” lightly!

In summary: the status quo of the crypto world is neither desirable nor in-line with what it should be. But what we have is acceptable for now and could definitely be a hell of a lot worse! With the cryptoverse being as young as it is, it would be unrealistic for us to assume that we should be running before we can crawl – let alone walk.

Rest assured that development WILL continue. We WILL see decentralisation continue to be driven, because decentralisation is critical to crypto success. Decentralisation is one of the main differences between crypto and fiat, and it is our primary protection against restrictive regulations and oppressive government tyranny. Decentralisation is NOT going away, and any crypto project which pushes too hard against decentralisation will simply be increasingly ostracised by the community – because it will have no benefit to us. CZ is no fool, he knows this, so he also knows in which direction to drive Binance. If you don’t trust his morals (and you have no requirement to), then trust his common sense – he’s not about to risk turning his creation into an obsolete pile of centralised garbage.

That concludes my little rambling on this topic. Things aren’t perfect: but they could be worse and they will get better.

Yours in crypto

Bit Brain

[1] Note:

Justin Sun did not strike first, the STEEM witnesses did. For as long as I have been with STEEM I have lamented the fact that it is dominated by authoritarian whales. The Hard Forks have served to increase profits in favour of curation instead of in favour of content creation. This has placed ever-increasing earning ability in the hands of those who already have most of the STEEM, and creates high barriers to entry. When Sun came along, they unilaterally made a proactive move to block him from ruining their dominance. This was blatant abuse of power and is the very sort of thing we see from governments around the world. Sun did not acquire STEEM in order to break the blockchain, he acquired it in order to BUILD value, thereby making it a good investment! If he wanted to negatively affect the community, then why would he ever have bought into the project in the first place? That would have been stupidly counterproductive. So I absolutely support Sun’s retaliatory actions, he’s not at fault here, the STEEM (now HIVE) cabal is. Remember: the shepherds scare the sheep with tales of the wolf, but it is the shepherd who eats the sheep in the end.

“The secret to success: find out where people are going and get there first” 

~ Mark Twain

“Crypto does not require institutional investment to succeed; institutions require crypto investments to remain successful” 

~ Bit Brain

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