Is Bitcoin Truly Decentralized? Yes – and Here Is Why It’s Important
Those within the industry understand that one of Bitcoin’s most important features – and perhaps its true core innovation – is its decentralized structure.
Bitcoin has no central control: no central repository of information, no central management, and, crucially, no central point of failure. And yet, most of the actual services and businesses built within the Bitcoin ecosystem are centralized. They are run by specific people, in specific locations, with specific computer systems, and they are susceptible to specific legal entanglements.
This situation creates tension and certainly a little irony – we have a decentralized technology, yet most things existing upon it are centralized.
To a casual observer, and even more to a cynical one, it may appear that the claim of Bitcoin’s decentralization is a myth – an overstated feature conjured up as a bullet point in Bitcoin’s marketing brochure, but suspiciously not apparent in the actual product.
Consider the structure of CoinBase, which is arguably the most successful Bitcoin wallet and payment service in existence. There is nothing decentralized about it.
Consider CoinBase’s internal policies – they resemble PayPal’s, not the distributed utopia Bitcoiners imagine. Coinbase wants to know who you are. They want to know what you’re doing with your money, and they’ll block you if they disapprove. They spy on you and control you as much as any traditional financial institution (and to be fair, it’s not really their fault – enforcers with guns will throw them in a cage if they don’t do these things; it occurs under duress).
This post was published at Bitcoin Magazine on JANUARY 22, 2015.