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Ask CryptoVantage: What Are the Biggest Centralized Cryptocurrencies?
One of the biggest advantages you will hear about cryptocurrencies is that they are decentralized systems, which is in contrast to the traditional centralized systems which are commonplace across all areas of our lives. Centralized systems are those in which the rules and regulations are controlled by a single or limited number of actors. Centralized cryptocurrencies are then those digital assets that are controlled in the same manner.
Are there any centralized cryptocurrencies? If so, what are they? These are the questions we will answer in this edition of Ask CryptoVantage.
Are There Any Centralized Cryptos?
Yes, there are centralized crypto assets, despite the very basis of cryptocurrency being founded on the idea of decentralization. There are assets that are intentionally centralized, and those that are centralized due to a lack of asset disbursement. There are also assets that are centralized due to their network structure.
Examples of Centralized Cryptos
Tether (USDT) and USD Coin (USDC)
Perhaps the biggest examples of centralized cryptos are a top 5 asset in the form of Tether, and a top 15 asset in the form of USDC. These are the two biggest stablecoins by both market cap and trading volume, and both are centrally controlled.
What does that mean? Well it means that USDC and Tether accounts and transactions can be frozen by them. Tether has routinely complied with law enforcement and they have frozen accounts and transactions multiple times in the name of the law. While this can be a comfort if you are worried about a hack, it also means that they could stop you from sending your money and there’s nothing you can do about it.
While Ripple not centrally controlled like Tether, the disbursement is completely within the control of Ripple Labs. They control what portion of XRP’s reserves enter circulation each month.
It’s possible that as much as 1 Billion tokens can enter circulation in any given month, although this has never been the case. Many are uncomfortable with the large number of tokens owned by the executive branch of the Ripple team Brad Garlinghouse and Chris Larson, because they could easily affect the market by selling their holdings.
What was once considered one of the most promising blockchain projects on the scene, EOS has tumbled from its once top 5 valuation all the way down to the 20s.
A lack of progress, poor engagement and a plethora of other factors have left the asset struggling to gain ground. The fact that the entire network is only controlled by 21 nodes at a time has not helped matters. In addition, it is almost always the same 21 nodes that get voted in. EOS is the best example of a crypto that is centralized due to its network structure.
