A cryptocurrency is a form of digital asset based on a network distributed over a large number of computers in the form of a digital ledger we call a blockchain. One of the main characteristics of blockchain is that it is decentralized. This feature not only allows peer-to-peer transactions, but also hopes to achieve an ecosystem where many players can participate and share equally. Now, a lot of people swear by the importance of decentralization in the blockchain and crypto world. But how decentralized is cryptocurrencies?
As of February 17, there are more than 17,500 cryptocurrencies and the total market capitalization of cryptocurrencies is around $1.9 trillion (approximately Rs 1,41,70,000). Among these, the market shares of the top 5 cryptocurrencies by market capitalization are:
- Bitcoin (BTC): 41.8 percent
- Ethereum (ETH): 18.8 percent
- Tether (USDT): 4.1 percent
- BNB (BNB): 3.6 percent
- USD Coin (USDC): 2.8%
The top 5 cryptocurrencies account for more than 71% of the entire crypto market!
Now, let’s see how the top 5 cryptocurrencies are decentralized.
1. Bitcoin
Bitcoin transactions are “confirmed” by miners using a process known as “proof of work”.
Bitcoin’s “hash rate” is the amount of computing and processing power in the network. If malicious miners get to 51% of the hash power, they can cause serious problems like:
- double spending coins, and
- prevent certain transactions from being verified
According to statistics from btc.comover the past 1 year, here are the hash rates of the top 5 mining pools:
- AntPool: 15.16 percent
- F2Pool: 14.86 percent
- Poolin: 11.81 percent
- QuaBTC: 11.10 percent
- Binance Pool: 10.18 percent
Top 5 mining pools control 63.11% hash rate!
2. Ethereum
Ethereum also runs on proof of work and the top 2 mining pools control over 51% of Ethereum’s hash rate!
Source: https://www.avax.network
3. Tether (USDT)
Tether (USDT) is a 100% centralized backed by fiat stablecoins issued by a Hong Kong-based company called Tether. The Company holds commercial paper and other reserves denominated in USD with USDT in circulation.
4. BNB (BNB)
BNB is the native token of the popular Binance Smart Chain that selects the 21 highest staked nodes as validators. The minimum amount for self-authorization is 10,000 BNB. That’s over $4 million (about Rs. 30 crore). This makes the Chain highly focused.
Source: https://docs.binance.org/faq/bsc/val.html
5. USD (USDC)
USD (USDC) is a 100% centralized fiat-backed stablecoin issued by Center Consortium, has 2 founding members – peer-to-peer payment services company Circle and Coinbase cryptocurrency exchange.
Rohas Nagpal is the author of the Future Money Playbook and the Lead Blockchain Architect at the Wrapped Asset Project. He is also an amateur boxer and a retired hacker. You can follow him On Linkedin.
Cryptocurrency is an unregulated digital currency that is not a legal tender and is subject to market risk. The information provided in the article is not intended and does not constitute financial advice, trading advice or any other advice or recommendation of any kind provided or endorsed by NDTV. NDTV will not be liable for any loss arising from any investment based on any recommendations, forecasts or any other information contained in the article.
