Bitcoin Forum

I'm trying to summarize in as few words as possible, what is the problem with centralized currencies?  Writing an article about why decentralization is important.  I would like a good problem summary to start.

I would say:
 - Someone always has the ability to counterfeit
 - Controlled by centralized authority who can change the rules as they see fit
 - Centralized authority can print more money
 - People can have their bank accounts frozen

Ideally a sentence or two to summarize. Maybe something like "Centralized currencies can always be cheated by someone and manipulated in a manner that most benefits those in control, to the extent of locking you out of your account or taking away your money if you do not behave in the manner those people would like.  When the people control the currency, the people decide the rules that govern it and no one person can touch your money without your permission"?

Anything else I'm missing?

Thank you!

We have already seen it with the Mooney we are usually using...centralized currency is guaranteed by the state and that is good but it is also subject to control and manipulation of the authorities. Though I am not saying that decentralized currency can have no disadvantage that is far from the truth as anything man-made or any system made by man can always have negative aspects as well...but decentralized currency can be better for now than centralized ones because practically our authorities are proven to be not trust-worthy and they are always subject to politics and self-vested interests or in other words decentralized currency is very much subject to human nature.

Governments are betraying their people as soon as they take the control of the state, otherwise the world needs centralization. They having the ability to print money and control everything is what people wanted them to in order to fight chaos, in order to be safe and have security but the only way they know how to bring safety is by building armies and military, that has costs, results in them cut other costs to manage the military, while some where in between some people are stealing for themselves, bitcoin doesn't let anyone to steal because it doesn't give the control in the first place.

Too complicated to solve the problem of money centered, need regulation from all countries to be able to agree. ;D

 The problem with this is the question of who will be the leading country who will launch the centralized currencies? What will be the basis to be qualified? Who will be the authorized persons to do this? But beyond those questions, the fact that clear rules must be set prior to that.  I guess, if we have centralized currency, the authority can manipulate the flow of money easily.  They can also control the production of money as well as its value.  More people will be having the idea of counterfeiting the money since there will be only one pattern of money.

Yes and the big problem with centralized currency are the inflation we are losing the values of money
 put the funds in fiat money is like burn the money slowly,
after couples years later the values of money is losing and our whealty is losing too, we can not become
 controller on printing fiat money and can not ask about it.

In my own view, the biggest reason against centralized currencies is the fact that people manning the systems are corrupt and can't be trusted. You see, the financial and banking systems which issued those currencies have been in there for a long, long time and slowly the problem of human nature crept in. Had it been managed by people who have good intentions and clean conscience, then we may not need to have a decentralized system of currency as represented by Bitcoin.

Still, I believe that we can have the best of both worlds. Bitcoin can posed a big challenge to the centralized currency system to improve their structure and governance so that they can gradually restore the faith of their intended market...while at the same we are enjoying the benefits of decentralization.

In life, we would learn that not one single solution fits the big problems and challenges we faced as a human race.

The main problem is not someone counterfeiting.

The main problem is that you are trusting someone else, no matter whether it's the government, your bank, whatever. Any sort of centralized framework, you are putting a lot of trust into others. As humans we have seen that others, no matter how trustworthy they seem to be can also turn around and stab you in the back. This isn't something that you would want.

Another problem as you said is the way that governments are manipulating their currencies to suit their needs, to fulfill the promises they made back in election. This often involved printing a lot more currency than the country could afford to in order to not tax more people(a very unpopular policy).

Bitcoin basically solves all this. You don't need to trust anyone.

To be honest, I don't think any of the reasons you listed here are significant. The main reason that decentralization is appealing is because of trust. With crypto, people place their trust in the regulation of the currency into algorithms, as opposed to trusting a government that can be corrupt and manipulate the currency.

1. Counterfeit is an extremely minor issue.
2. The fact that a centralized authority can change the currency is actually arguably a positive, since it means the government guarantees a certain value for the currency.
3. The ability to print more money is necessary with any physical money.
4. I don't know what you are talking about with people's bank accounts being frozen or how that would not apply to bitcoin. In fact, bitcoin wallets are SIGNIFICANTLY less secure and reliable than bank accounts.

i completely agree with 1, 2 and 3 you nailed it. but you screwed up in number 4 because it is total nonsense.
there is nothing more secure than a properly created bitcoin wallet.

you can obviously use a web wallet, use a wallet on an online computer riddled with malware but that doesn't mean bitcoin wallet is insecure it means you had some cash with you and put it in a see through plastic and left it on a park bench and closed your eyes wishing nobody takes it!

a cold storage that is created right can not be penetrated. and it is SIGNIFICANTLY more secure than anything else you can ever imagine.

Maybe someday this problem will be solved. I think that is not difficult to come up with encrypted removable media for cold storage savings in bitcoins. Similar to a Bank card, but without reference to any Bank or e-wallet.

You can't really do a lot of things if the currency is centralized because it is controlled by a certain group whether organization, government and many more. That is why people now are just looking for a currency that is decentralized that gives freedom to themselves and also give them a place where they can decide on what they will gonna do to their money without having issue from the government.

I think the major problems with centralized currencies is inflation, manipulation, looting and higher interest rates. The financial problems we are facing today is due to centralized currencies. Decentralized currencies on the others hand ratified this issue.

Nice topic!

I believe the biggest problem with centralized currencies is how the actual use differs from the theoretical use. Theoretically a committee of experienced people managing the currency may be wise, but if those people are human (as they all are) they are at risk of becoming corrupt and then manipulating the currency to suit their own benefit. And there are likely more scenarios where centralized currencies are manipulated to "protect the people" or "protect from a greater evil"...like hyper inflation or recessive spending or to spark an economy. This type of rationale leads to a slippery slope of continued manipulation.

And Bitcoin isn't as decentralized as we all hope. There is a core group of developers that used to influence Bitcoin quite a bit and now we have a core group of miners that can impose their will over the future of bitcoin (see UASF and SegWit topics for more detail).

I read in Nathaniel Popper's Digital Gold book that only 15% of bitcoin's blockchain remains in the form that Satoshi deployed, due to the custom developing that has gone on. Would you think this is good for a decentralized currency or bad?

Here's an opinion article that may provide an interesting perspective: https://medium.com/metacurrency-project/national-currencies-arent-as-centralized-and-bitcoin-isn-t-as-decentralized-as-you-think-fa2afa022a2b (https://medium.com/metacurrency-project/national-currencies-arent-as-centralized-and-bitcoin-isn-t-as-decentralized-as-you-think-fa2afa022a2b)

And can I request one thing - will you please share your research paper with us here? We all benefit from the different analysis, opinions, and research our fellow members are conducting.

The biggest ill I see with centralised money is ownership. If I pick any currency note, it is clearly written on top-
"Promised by Central Bank"
So in the end, I am just representative of that money, real ownership of that note is still with government, the government who proudly says,
"People's government "
But in reality we are the ones on bad side always and government kill our rights through regulation and we aren't free to use our own money.

Problems of centralized currencies is if the people delegated to manage it make wrong decisions we are likely to see a negative impact not only on the currency but the economy of that country. One of the biggest problems of centralized money to date is counterfeit and corruption which can only be minimized by adopting the blockchain technology.

In my own view, trusting someone else or institutions like government is a very big problem when it come to the issue of centralisation of currency. This is because the government will be able to manipulate, print or influence its availability or holding its which can either lead to inflation or deflation in the economy.

You really do not need to research anywhere else to know the problem when it comes to centralized currencies,lets take the example of Ethereum,hope everyone knows that there was a hard fork when there was a hack and everyone close to Vitalik Buterin lost some money with it and how he single handily took the decision to fork the entire chain without any consensus,if you develop something you need to stand by the general consensus and never take individual decisions according to your taste and not to forget the pre mine which is really huge and that is the biggest example i can give you for these sort of centralized currencies.

that's true , it's not that easy to change any regulation regarding currency ,
but it's always better to use a decentralized currency like crypto when you have know well about it ,
as time goes by people will switch into decentralized currency if then the crypto project accepted well in general public , hopefully
governments are the only authority that most people know about who control of currency circulation , anyone else?

- in decentralized currency, bitcoin can't be counterfeited.
- this is why decentralized is better than centralized, no one can control and change the rules, i've tired when my banks change their tos.
- so far this is the problem for them to control the inflation.
- yeah they can lock or freeze our money if we against their Tos.

in additon:
- decentralized is good for those who want privacy like purchase porn, gambling etc.

I wouldn't say that "Someone always has the ability to counterfeit" is a good argument when it comes to railing back against centralization, but it would make sense under certain other arguments. And while governmental bodies can change the rules when they see fit, it is typically uncommon for them to do something like that in most countries throughout the world. A majority maintain similar laws for long periods of time with minor changes or amendments to existing laws.

Beyond that you have a pretty good basis for an argument though. Good job, to say the least.

Something that I don't like from centralised currencies is they can supervised our transaction and can make assumptions which they think is correct and froze our account, in centralised system we don't have the full power to control our money and there will authority that can make extra rules to seal our freedom

People. That is the problem with centralized currencies. At this point, a select few people control the centralized currencies of the world and, as the saying goes, he who controls the wealth controls the people.

With an unregulated and peer-to-peer network like Bitcoin, the people with the currency controls the currency. It is up to US what the values are. Therefore, by definition of the saying above, we control ourselves.

That is why a lot of people hates centralization because it means that they can easily control our account and do the things that they want to do with our accounts. Bitcoin is one of the solution to that problem and people now are just transferring their money from bank into bitcoin because governments cannot touch their money if it is on bitcoin.

A centralized currency is only as good as the justice system in the country from which it comes.

In a way that makes the euro better than all other fiat currencies I can think about, because since many countries are behind it, it's more difficult to mess with it.

Still centralized with all its faults, though.

Look at India and you see why there are problems with centralized currencies.
They recently decided to invalidate most of thier cash money, meaning pretty much everyone in the country had to go to the (massively overworked) banks to change them for new notes.
If you had more than a certain amount, it wasn't a very high amount, then you had to explain why you had it.

If you earn your money and decide to keep it as cash, why should you be obliged to change it at the whim of the government and why should you have to explain yourself when you are there?

It might seem unlikely in America or Europe, but it could happen and the big notes are being slowly removed from circulation, they could invalidate them at some point.

And just to add, if our account falls below their maintaining balance, they will give penalties/charges until you can't deposit anymore and eventually closing your account. You have to pay them while your money is with them. Thinking of that is just ridiculous. But that's how bank institutions work. So yeah, they have power over your bank account/s and that's why they don't like digital currencies.

The main problem of cash, that is visible, and anyone can touch it, and it smell.

http://www.ilrestodelcarlino.it/ancona/cronaca/2013/09/11/948365/images/2321199-banconote.jpg

http://www.lanota7.it/wp-content/uploads/2014/01/soldi.jpg

http://www.soveratiamo.com/images/2014/02/contanti_sequestrati_aeroporto_Lamezia.jpg

http://lightstorage.ecodibergamo.it/mediaon/cms.newecodibergamo/storage/site_media/media/photologue/2017/4/18/photos/cache/valuta-non-dichiarata-per-140mila-euro-aeroporto-sequestri-per-due-passegg_4dc2b312-2409-11e7-8176-e7a0dc0a3b11_998_397_big_story_detail.jpg

http://2.citynews-pisatoday.stgy.ovh/~media/original-hi/4105393849958/soldi-dogane-2.jpg

The State is searching to control cash and not permit to have it too much.

You are missing the major point where centralized currencies fail conceptually

It is certainly true that the ones controlling fiat (which is a generic term for centralized currencies) can lock you out of your account as well as just outright steal your money from you, and that may in fact not even be related to how you good behave (which is even worse). For example, when Cyprus haircut happened, the money was taken from all depositors indiscriminately. But these are still minor details. It could be said that "the major problem of fiat money comes exactly from where its strength stems, i.e. from the arbitrariness in decision-making about the amount of money to be issued"

It does really sucks for that kind of situation because i do experience that thing when my account have been closed because of the pil of interest rates on my account which i cant able to repay because its already huge for me.Yes, banks do really works on this way and as long its centralized we cant do anything about it but to follow their rules and terms. They dont really like crypto because of its decentralization and they cant make money out of it.

if the economy in a country is really bad, and the value of the currency is falling down, you can do nothing, right? Everybody does not live in northern countries, so centralized currencies usually have not any values to use.

The problem with centralized currencies, is they are able to control your bitcoin or anything that you have.
They can give tax, and control your cash balance. unlike Bitcoin bitcoin was decentralized concept of a system.

Great summary.

A lot is overlooked when people say that bitcoin is redundant and everything that bitcoin does can be done with a bank, plus more. The fact is that when you are using any sort of paper currency issued by a government you are trusting them with your wealth, just like if you stored your files on google drive you are trusting them with your privacy.

Governments are designed to benefit the people but you have to ask yourself is your government really benefiting the people? Or just themselves and their close friends and family? A lot of the times, the second one is true. Switching to decentralized currencies, such as gold and btc would mean that governments cannot control your wealth, and therefore, how you spend it.

Counterfeiting is not a main issue of Centralized currency but when you think of it Bitcoin also has a problem being volatile. They have their own advantages and diadvantages and both are not their fault but the users who wants to take advantage for the both of them. Actually wihout Fiat Currency a country's economy is nothing.

I have an opinion that you are supporting crypto currencies centralization.
Bitcoin just can't to be centralized the first of all cause of no one country has rights for this currency and can't admit it as their national so easy. The second is centralized fiat is overfonded to countries gold wealth, with bitcoin it's impossible to make such connection. There are some more reasons, but a thing that I'm trying to say is that bitcoin don't need to be centralized, nobody want it, besides governments' heads who wish to have more money from this in their pockets. I am for some governments control in this area, but just to be protected from scammers.

Dude, where are BTC miners "centralized"?
Kiss the Ass on Chinese Communist Party for the hole in a Great Wall.
And drink some shot in memory of Chinese carbon extractor deaths in producing cheap electricity for f#cking ASIC's.

One facet of the centralization versus decentralization debate is: competition.

What would the personal computing CPU market look like if the market were monopolized under intel for the last 20 years under a centralized format? Competition between intel and AMD incentivized CPU advancement, innovation and discovering methods to produce chips at lower cost to consumers.

Under a centralized format all of these free market, competition derived, benefits disappear. This same precedent could apply to currencies.

When they're too centralized in a way which restricts competition and innovation what is left trends towards industry wide stagnation which translates to exorbitantly high prices and corruption rather than progression or cost effectiveness.

centralized currency are heavily monitored, which i don't like, you can't do anything purchase, anything without "them" knowing it, also the fee are higher for some operations

then add to that all the hassle you need to have to get a debit credit card, and all the restriction per day on the withdrawals and deposit, there is nothing which is not a pay in the ass with fiat

bitcoin give you complete freedom even on fee you can decide to pay zero and wait more, maybe forever, but at least you can do it

then you have the inflation vs deflation argument, all the centralized currency have a inflation system which is going to collapse the entire economy at some point, i see bitcoin as the savior of the global economy when the current block limit issue will be solved

This is certainly true in respect to CPU chips

But how well does it translate to currencies? The first thing which comes to mind is that while fiat currencies are certainly centralized, they are no more centralized than the chip makers themselves as economic entities (or any other manufacturer out there). Indeed, if it were only Intel, or IMB in pre-PC era, we would likely not have a personal computer in every home. But is this really different with currencies? After all, there are over 100 fiat currency "producers" out there (but only half a dozen chip manufacturers), so you can't possibly say that there is no competition between currencies (if that was your point)

I'll contend: one of the key reasons behind the recent tech boom is the decentralized format under which capitalist countries operate.

Google & apple began as small businesses run out of someone's garage. A massive amount of innovation and progress defining the tech sector came about as a result of open door policies where anyone who feels they have what it takes to compete is free to try their luck.

Currencies by contrast have centralized, closed door, policies which one might characterize as restricting innovation and progress. Banks have the same. Could centralization, lack of competition and monopolization of currencies be correlated with stagnation, lack of innovation & progress?

I guess you are trying to throw out the child along with the bath here

You are talking about how some entity (like Google or Apple) started, but is it relevant to the point discussed? Even if Apple had started in a garage, this doesn't change the fact that it has always been centralized as an economic entity. In fact, Jobs was famous for his authoritarian style of management and autocratic leadership, while Google is said to be rather flexible and liberal in this regard. I think you can easily draw an analogy here with a fixed exchange rate currency versus a floating exchange rate currency. But this is still irrelevant since what matters here is the competition between currencies in the world currency market which is essentially the same as the competition between companies in their respective markets

Centralized currencies are something which one does not own it literally, but is owned and controlled by the governments, we use it and pay charges like taxes, etc for that. The notes or coins which we use are actually like tokens worth that amount. Whereas the decentralized currencies, one owns the amount he earns and is not controlled by someone else.

The problems we are having today is because fiat is centralized and because of this there is higher inflation in most of developing countries and even developed countries are also feeling the infect. Corruption and self aggrandizement is prone in centralized currencies. I think the best thing to do is subscribe to this new trend of decentralized Currencies such as bitcoin and others crypto currencies.

I really dont see any problems with centralized with the exception that if you have a very weak economy, thats going to rise the price of commodities and mostly when your currency falls to the US Dollar, price of thins goes high.