CryptoCompare Study: 85% Of Cryptocurrencies Are Not Decentralized
Decentralized governance and security are some of the key selling points of most cryptocurrencies. Unlike fiat currencies, no single entity is supposed to call the shots when it comes to how cryptocurrencies operate. However, a new study has raised serious doubts as to whether such forms of money are truly decentralized and secure.
Decentralization vs. Centralization
CryptoCompare in its study appears to have detected some form of deficiencies when it comes to how decentralized cryptocurrencies truly are. The fact that most developers can alter crypto platforms goes against the basic principles of decentralization.
In a report published in the tracking resource website, it is emerging, that 85% of crypto assets allow developers to alter platforms. This is in contrast to the fact that such changes should only come into being, on the involvement of the entire community in a project.
The study clearly shows increased levels of centralization in projects that bill themselves as decentralized. The fact that developers can alter the blockchain projects protocol at any time raises serious concerns about the future of decentralization.
CryptoCompare Study Findings
According to CryptoCompare, 55% of projects in the cryptocurrency market are centralized rather than decentralized. Further analysis also showed that 30% of the projects fall into the category of ‘semi-decentralized’ as opposed to being fully decentralized. The fact that only 16% of the existing projects are fully decentralized should come as a shocker to many.
CryptoCompare study findings also show that 41% of the tokens used as a source of payment in the sector were centralized rather than decentralized. On further analysis of the tokens as per the guidelines established by the Swiss Financial Market Supervisory Authority FINMA, the resource firm says it concluded that 55% of current tokens fall under securities classification.
Classification of cryptocurrencies as securities would call for their regulation as other securities traded in the market. In contrast, CryptoCompare says Bitcoin and Ethereum are not securities, given their high level of decentralization and lack of identifiable enterprise.
Cryptocurrencies Securities Debate
According to the report, of the 200 crypto assets, 157 continue to receive a sort of funding from ICO or pre-sales. The funding essentially makes them subject to FINMA ICO security guidelines. The guidelines consider all assets and pre-defined utility securities.
“Following Swiss FINMA regulatory use-case classifications, 65% of the top 100 crypto assets by market cap are considered utilities, 22% are payment tokens, and the remaining 13% are either asset tokens or combination use-cases,” CryptoCompare Study.
According to CryptoCompare CEO, Charles Hayter, the study findings will help industry participants, as well as regulators; gain a better understanding of cryptocurrencies. The data should also help investor’s eyeing opportunities in the sector gain a better understanding of what most cryptocurrencies are all about.
For the longest time people and investors have pursued cryptocurrencies on some of the attributes touted in the sector. Security and decentralization are some of the attributes that have made digital currencies interesting. However, it is still unclear whether CryptoCompare study will have a significant impact on people’s perception having emerged that most cryptocurrencies are not entirely decentralized.