Bitcoin Forum

Hello fellow Bitcointalkers!

I've been mulling over this for quite some time, and I feel it's time to dive into one of the most profound topics in the crypto world: Centralization vs. Decentralization. I've noticed this duality splits the community and I wonder, is there a balance to strike?

Centralization:

Pros: Potential for faster transaction throughput, a focal point of control and regulation, easier to implement changes and updates.
Cons: Risk of a single point of failure, susceptibility to censorship, a tendency towards monopolization.

Decentralization:

Pros: Censorship resistance, enhanced security through distribution, inheriting the initial spirit of Bitcoin and the idea of autonomy.
Cons: Potentially reduced scalability, decision-making difficulties, possibility of fragmentation and disparities.
It's clear both come with their merits and demerits. But, do we need to acknowledge that both can coexist? Are there situations where centralization could be beneficial? Can there be a balance?

Eager to hear your thoughts! I believe it's vital to discuss these matters to guide the future of blockchain tech and cryptocurrencies in the right direction.

Let's have a fruitful discussion!

You forgot to include potential hack, threat to privacy, possible lost of funds. You didn't look into FTX before you write out the cons of centralization.
I don't understand what you mean by throughput, what is exactly is centralized maximizing in a centralized system except for database and optimizations which comes with at the expense of KYC, you can't use their service if you are not verified, is there anything special about that? I'm even trying to picture one good advantage of centralization but the thought of centralized exchanges will not make me see much benefits but demerits of using them. Centralizations always put their ambition before the people.


Without decentralization, centralization will die quickly but decentralization will remain functional until it last breath of the people that protects it's ecosystem, the reason why we have centralization today is because of decentralization, Dex can survive with Cex but if table were to turn around, the latter will not make it. So Dex win and I don't think decentralization are even forcing balance, no need for that unless cex's are trying hard.

They are proven coexist since there’s a lot of decentralized that is now being centralized through the use of different medium such as exchange to regulate assets that was supposed to decentralized through the use of KYC to all customers. It’s not directly centralization towards the decentralized token but rather through the user holding it or purchase through exchange because it removes privacy of owning that particular token since it can be tracked through the use of blockchain record from exchange.

The advantages you outlined for centralized exchanges outweigh the drawbacks associated with decentralized exchanges. I'm not sure if this was intended to divert users' attention from decentralized exchanges, but I believe that decentralized exchanges are more appealing to both large and small traders. Personally, I believe that the development of multi-chain decentralized exchanges will be a significant advancement over centralized exchanges in the future.

The example of mining shows that we ourselves are prone to centralization; miners choose pools with a large number of participants, thereby exposing the project to the danger of centralization. Nowadays, most Web3 projects offer a full range of services (exchange, swap, LP) and there are more and more such projects every day, which is positive for decentralization.

In my opinion, the status quo systems in crypto are good enough for now until we can find more better ideas that would improve decentralization or take us closer to full decentralization of all of the system components of any of the blockchain networks available right now. From network infrastructures to applications (Smart contracts) built on these networks. Initially, I used to think that Decentralization is easy but then, the demerits like delayed consensus and issues with scalability makes it harder to achieve this. This is why the Blockchain Trilemma is still an unsolved case till date.

A bit of centralization to protect core system resources plus decentralization of other network operations is viable for now. I'm on the lookout for new ideas that might improve decentralization without tradeoffs in security and scalability.

This happens because of the economy of scale, an example of this is Walmart, Walmart can sell its products for cheaper than retail stores as they can get discounts due to the enormous size of their operation and their ability to acquire the best possible technology for the job, so it is not surprising that mining cryptocurrencies follows the same principle, so as we can see centralization is a natural occurring event, however its cons are also naturally occurring, which is why it is important to still push for decentralization, especially when it comes to our finances and the money we use on our everyday lives.

Yes, they are both coexisting and there can't be just decentralized or centralized.

That's why it is needed for most of us to know the importance of having both of it. In the past, if it's about hacking incidents, both of these platforms have been targeted by hackers.

And that means that there's no safe one on this one because hackers are targeting those areas that has money but it is that many of decentralized platforms or exchanges have a weaker security.

My question is;  wouldn't you love to have a complete control of your funds?
Are you a child where someone else or a third party has to be in custody of your funds at a fee?
Answer that and you will knoe what my thought is.

Everyone needs decentralization!

If you are long enough been in this crypto industry or have enough experience and knowledge regarding those two exchanges, you will know the right time to use them and you won't miss some crucial points regarding some of their critical issues. For example, when you want some fast transactions and want to easily get your altcoins converted and send it to your local exchanges and withdraw it as soon as possible, centralized exchanges are recommended for it and when you want to keep your transaction secured and safely stored your crypto for a short period of time, you may want to use decentralized exchanges.

Certainly, there is nothing wrong with both to coexist.


I hardly think there are any significant advantages. But I believe it solely depends on the context, within some settings a degree of centralisation is required, and rather a necessity. So there couldn't be an exact balance between centralization and decentralization, one thing to note is that, currently, many cryptocurrency projects sacrifice some degree of decentralisation and yet still claim they are decentralized, this is what I think is rather wrong.

After all, cryptocurrency is a brand new thing, so we shall see how it develops and gains maturity to see how the space will evolve.

Being centralized and decentralized have pros and cons.

We can't hide the fact that there's a benefit of being centralized and decentralized depending on what people need.

Which side should we choose? I don't really care as long as I think it won't bring any harm on my part.

Yes, I agree with this, because there are some people that being too decentralize will make their life harder while on the other hand, being centralized is also not good for some other people. It's kinda annoying because there's no perfect at all.
But with Bitcoin is being decentralized, it's a good thing I can see because it solve most of the problem that we have on centralized entities.

I'm totally agree. Centralized exchanges are equivalent to express trades.  Excellent for circumstances requiring speed and simplicity, high-volume trading, and access to a diverse choice of altcoins. While DEX, they prioritize security and provide you more control over your assets, making them ideal for circumstances requiring safety and sovereignty. They're great for folks who wish to keep their crypto assets safe while still maintaining ownership without relying on a central authority

Accumulating both centralized and decentralized assets could work together normally. We all know that we need both depending on what we are doing with our crypto funds. I personally have no problem with two of them as I already knew the pros and cons. I think centralized assets or exchange will only be used for short term while decentralized is for long term.

Thank you for this relevant and well-articulated discussion topic! The question of centralization versus decentralization is indeed a crucial debate subject in the realm of cryptocurrencies and blockchain.

I would personally lean towards the importance of decentralization, especially in the context of the original philosophy of the blockchain. The fundamental idea behind cryptocurrencies like Bitcoin was precisely to eliminate the need for a central authority, thereby facilitating peer-to-peer value exchange and creating a more open and accessible financial system.

Mostly people store their funds in Centralized Exchanges, like we can say in an Exchange like Binance. These people store mostly their funds and most people trust it because the security system of some of them is very strong. While in Decentralized Exchanges people can only trade for low term. In this, some projects have also a high slippage which requires a lot of fees, this people mostly deny it some times. Everyone has a choice of their own, but I personally like Centralized Exchange the most, and I do trading mostly in Centralized Exchange as it is completely secure and easy to use.

Centralization has several tangible advantages. With centralization, the number of scams and frauds will decrease because there will be control and regulation, there will be a minimum of anonymity among development teams, and there will be much less exit scams. With centralization, cryptocurrency adoption is faster because investors and coin owners are protected from various frauds. Decentralization is a true solution for crypto users, but it generates a huge number of scams and scammers.

Most of us here are not a newbie anymore and as an experienced user, we know the phrase called " not your keys not your coins " . So don't say that many people store their funds inside a CEX. No matter how strong their security are, it can still be hacked unexpectedly by a skilled hacker. DEX on the other hand can work differently.

I think there is no way to store our funds on them but we should always disconnect our wallet right after we trade just to be safe. It's also a good idea to use a separate wallet only for this purpose. Like you I also prefer CEX. I can only trade on DEX if the coin that I got from the airdrops and bounties are listed on it.

There is nothing wrong with using a centralized exchange if that is what you want, after all we cannot deny that their fees are cheaper, their service faster, and I can see why traders prefer them over DEXs, however to store our coins there for the long term is a big mistake, and this is a lesson we have seen over and over again and many traders still refuse to learn it, despite knowing very well that if a hack happens to the exchange they are using the losses they can accumulate will be massive.

People will always adopt centralization because it's cheap and convenient, and let it centralize until it collapses. At this point, what was decentralized before is what remains.

Cryptocurrencies gave us the tooling to have decentralization in finance. But their main motor of growth might already be those who find exactly that inconvenient and head towards centralized services. Otherwise, there would hardly be any loud outcry when a big platform dies.

Both actually have their own pros and cons and with our current market status, I think many still prefer a centralized project for the security purposes although it will still depend on the project itself. Many are into good projects regardless if its Centralized or Decentralized as long as its a good one, investors will still come. CEX are more popular because it follows regulation and it offers security, many Decentralized project are losing their reputation because of the scam projects.

That’s true, both have their own pros and cons and its up to you if you are going to choose Centralized project or decentralized project, we all have our own preference and seriously most of the top projects today are centralized. If you are looking for a good investment, better to consider this two and also its better to have your own strategy, and know when to buy and sell. Whatever the project is, you should still analyze and this two can be your own option.

There are not different between cex and dex. Dex was actually bullshit and it's even more often to be hacked compared with cex. People have cex as a better choice. Look at so many people are loosing their money caused by they use dex and the scammers behind dex never reimburse their money.
Cex is offering better guarantee to our money rather than dex. Dex is a garbage thing right now and it's very easy to be hacked by hackers. Look at so many so many dexes got hacked.

Merlin, sushi, curve, and many more. Dexes was actually fake product and it's not as decentralized as what people think.

Hold up there, I don't think "easier to implement changes and updates " is a pro. In the first place, changing a process means there's something wrong with it and/or a 3rd party intervention is necessary. This shouldn't necessarily be needed since it leaves room for access in a process that shouldn't be changed in the first place. If there's a change that needs to be made, it shouldn't be "easy", at least imo. Well I guess if it was a pretty shitty system then implementing changes easily can be a pro, but that just goes to show that it's, well, "shitty".

Hello there,

First and foremost, thank you for initiating such a pertinent conversation. Centralization and decentralization have indeed been at the heart of many discussions in the crypto space.

To delve into the benefits of decentralization over centralization, one must first appreciate the core essence of blockchain technology and the very birth of cryptocurrencies. Decentralization stands as the backbone of this vision. Without it, the web3 that many visionaries and developers are striving to build would be impossible. The idea of web3 is to provide a decentralized internet where platforms and applications are built on a peer-to-peer network, ensuring greater freedom and control for its users.

A key area where we're seeing this decentralization push is in the realm of social networks. Web3 social networks are striving to achieve full decentralization. This is not just a technical pursuit, but an ideological one, aiming to provide users with freedom of speech, an absence of censorship, full control over their funds and content, and heightened data security. Unlike traditional centralized platforms where personal data is often a requirement, most decentralized apps (dApps) on web3 allow users to engage without compromising their personal information.

A prime example of this endeavor is Solcial.io, a web3 social network that envisions building a fully decentralized platform. By doing so, it aims to address many of the pain points users experience in centralized platforms, from data breaches to arbitrary content takedowns. However, the journey to widespread adoption of such platforms is not without challenges. For networks like Solcial to thrive, there needs to be a broader acceptance and understanding of decentralization and web3 among the masses.

While centralization may offer certain efficiencies, the transformative potential of decentralization is undeniable. It's not merely about the technology but about returning power and control to individuals. That said, the debate of centralization vs. decentralization isn't about choosing one over the other in all scenarios. It's about recognizing where each has its merits and harnessing them appropriately. However, for a truly autonomous and free digital world, the scales might need to tip more towards decentralization.

For me, I think Both are beneficial. Decentralisation allows you to control your assets the way you want while centralisation these days help you control your asset the way you want. Although, people might say centralisation isnt safe enough and this is why most of these centralised entity are transparent with proof of reserve. Have know Binance and Bitget with good reserve so far. So, these makes them look safe for any customer.
Many people are also concerned with converting crypto to Fiat and this is mostly done by the help of these centralised companies.

They exist both for a reason yeah Ive been using both and they really got a pros and cons. Well for convenience it favors me on cex when I am gonna cash out my money while I used my non custodial wallet for different dapps across different L1 and other networks which is really amazing too.

Regarding security, well no one beats a decentralized approach as precaution and just be mindful of the risk associated on some malicious links.

To put it in simple words there are some factors due to which users prefer centralized exchange over decentralized exchange is because of user interface and transaction speed and more volume with more trading pairs which are not possible in DEX (to the extend of top centralized exchanges). DEX needs to pull up the socks and start working towards making it user friendly in order to gain more customer base because users are left with no choice rather to switch to CEX knowing that their data is exposed.

Without a doubt, centralized exchanges have their attractiveness. They are a hub for traders because of their reduced costs, quicker service, and more efficient procedures. However, as you pointed out, the dangers are obvious. It is a puzzle, isnt it? Why do traders always take risks with their assets? It would seem that lessons learned from the past and anecdotes of hacks and breaches would suffice.

Still, the argument persists and the cycle continues. Why are so many people voluntarily eschewing the most fundamental principle of protecting their possessions if the main objective is to maximize benefits and minimize risks? Either overconfidence or convenience could be the cause. In any case, traders must learn that compromising long-term security for the sake of convenience in the near run might have unfavorable outcomes. Even though it is a lesson that is frequently taught, it is frequently ignored.

Finding the balance between centralization and decentralization is essential for blockchain's future. It depends on use cases - efficiency vs. resilience. Let's discuss and guide the tech in the right direction.

I do not think that OP analyzed only having the exchanges in mind. He was saying from the holistic approach of centralisation and decentralisation as regards the cryptocurrency industry.

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There might be many pros of centralisation, I am surprised because we are used to centralisation in our endeavours, decentralisation is somewhat sounding as a newbie to us. Most decentralized platforms and entities are gradually being centralised and I am not also bothered in as much as bitcoin remains untouched. Decentralisation is the way and we must learn to lean towards the way.

Decentralized projects very rarely combine such qualities as reliability and longevity. In the entire crypto market there are only a few projects that can possess these properties and all of them use POW consensus. Decentralized PoS is decentralized only formally, because all PoS have major holders and a team of developers who can control the project and make changes that are beneficial to them in the first place.

Can they coexist? They are already coexisting whether some of us want it or not. Take exchange platforms as an example, the most popular cryptocurrency exchanges in the world, like Binance, are centralized exchanges, and people prefer them over most decentralized exchanges the most probable reason for that is that they provide more features and tools for the users when compared to decentralized platform, and people also think they are more secure.

The increasing regulations all over the industry are basically forcing a lot of decentralized platforms to either convert to centralization or simply close shop because you can't be a decentralized platform and comply with the rules and regulations of the authorities such as KYC and AML and stuff. The only decentralization that will always stay is Bitcoin's.

Thing is, we don't have to go towards pure decentralization without centralization. Core can be decentralized and everything centralized we build on top of that doesn't mean we have necessarily lost something ideological. Thing is, we need some sort of centralization at some point, but if the core, like with bitcoin is decentralized, i can't see any harm building centralized services like tokens with ability to freeze them over it. That doesn't mean we would lose core values, but more like adapting to reality.

I can't see total and absolute decentralization of everything being a desirable intrinsic value. It's valuable only where it truly matters.

There’s this saying “Not your keys, not your coins. I see a great sense in what you are saying, but there are some vital advantages of centralized exchange we can’t overlook. Changing from fiat to stables or crypto has been made very easy be centralized exchange, tho some decentralized wallet  offers this services too but their fees are outrageous while on the other hand centralized exchanges charge less amount. For me! they both work in handy

Both have their pros and cons but what I don't get is why people keep shading Cex black even if they know the danger in DEx is more numerous than cex. This makes me wonder, how people don't still get it that anyone can easily fall for scammers on dex than cex. Fine, Cex can be hacked. That doesn't mean Cex can't be hacked too Mixin for example got hacked with no trace.

I use both but I think I prefer cex in this case when it comes to security, to be honest. I think I once shared about how to secure ourselves and how to go about it in my previous post. There Cex like Bitget, Binance and even Kraken that do well when it comes to security

Amongst all that comes with centralization, the most controversial is central control, this point creates a loop for human sentiment and favortisim to come to play. The ethics of Centralization would have been great if there were no interference of emotions, but then, it concerns finance, it is almost impossible to guarantee the non-existence of favoritism and control, mixed with emotions which can cause a bias, which is unhealthy for financial transactions. If this can be addressed, then the possibility of both centralization and decentralization co-existing can be considered.