Cryptocurrency…the one thing that makes it unique against everything else in the
world…is decentralization. Unfortunately, the crypto space is straying away from the one thing
that sets itself apart from the traditional world of centralized
finance. But we dont’ let crypto go down that easy…we are going back to our roots
to fight back against centralization. Because it’s time for Chico Crypto!!
Decentralization….that is what crypto is all about. Bitcoin launched in 2009 and created
the world’s first fully decentralized money. Starting a revolution that would change the world.
But that revolution is coming to a grinding halt over the past year or so.
Centralized blockchains, applications and services are taking over the crypto markets.
If you didn’t know out of the top 5 cryptocurrencies,
3 of them are centralized. Luckily the top 2 are still fighting for decentralization to
their cores. Bitcoin and Ethereum….but number 3, number 4, and number 5 all have major
centralized aspects to them. Those crypto’s are. Binance Coin, Tether, and Solana.
Today, we are going to reveal their centralization and thus
hopefully get the markets to realize…they need to either decentralize or GTFO. Get the Fuck Out.
So let us begin with Binance, their Binace Coin and chain. The Binance
Smart Chain works on a modified version of Proof-of-Stake consensus mechanism called
Proof-of-Staked Authority..which only has a validator set of 21. Usually,
blockchains using Proof of stake will have thousands of validators validating transactions
like in the case of Ethereum which has over 280 thousand validators for it’s POS chain.
Now some of you may be like, comparing binance chain to ethereum 2.0 is like comparing apples
to oranges…well the centralization gets much, much worse. I’m sure some of you have seen this meme,
select the image of which are binance validators. And they are all pictures of CZ. Well that
is because Binance themselves, or binance influenced entities are all the validators.
Messari research and one of their analysts, Wilson Withiam put out a great thread and infographic
on this centralization and how validation is done with their chain. Wilson said “Some might
overlook the influence Binance Chain has over Binance Smart Chain's validator set.
BSC has 21 active validators, making it more centralized than most platforms.
This validator set is determined daily by Binance Chain, a network managed by just 11 validators.
Binance launched each chain with "a few trusted nodes" in the validator set. BSC now supports
several third-party validators, although at least 5-6 others have close ties to Binance.
The distribution of validator accounts is far less clear for Binance Chain. It's hard not to presume
that each Binance Chain validator is in some way connected or tied to Binance. They each take turns
producing blocks in a seemingly predefined order. There doesn't appear to be any stake-weighted
mechanism to determine which one produces the next block. For those using BSC, take the time to
understand the topology of the network. Sure, the fees and speed (both UX factors) are undoubtedly
preferable.But strong censorship resistance and fault tolerance are not part of the package.
AND CZ, he doesn’t care….he is all for centralization…all
while putting on the facade that he is for decentralization.
January 10th he tweeted this “I believe in decentralization”. Just a week and a half earlier,
he said this December 30th. (Link #4 CZ Centralization)
Sooo Binance, it’s chain, and products including their stablecoin BUSD…I
wouldn’t touch with a ten foot pole. But our next crypto, another stablecoin,Tether,
is just as bad, and Binance and them have a special relationship…from the Tether rich list,
the top 2 wallets are Binance cold storage… Shady centralization loves to keep the same company…
Now, I don’t want to get into the house of cards that is Binance and
Tether..that is for another video…I just want to dissect the centralized aspects of Tether.
Of course verifying the backing of Tether, the auditing of the assets that make up
USDT is as centralized as it gets. Tether has never been audited in its history
and it’s market cap is nearly 80 billion dollars. From 2015 to today, Tether has said we will do an
audit. But they never do. Per example in March of 2015 Tether and Factom announced they had formed a
partnership to provide greater transparency into Tether’s holdings. That audit never happened.
Same thing happened in 2016 and 2017. 2016 Ledger Labs was supposed to do one. It never happened.
2017 Tether announced they had engaged Friedman, LLP, in New York, to perform a comprehensive
balance sheet audit. This never happened either… (Link #8 2017 Audit)
Well let’s fast forward to recent times, July of 2021…and hear what lead counsel for Tether,
Stuart Hoegner had to say about an audit…
Months away, an audit not an attestation. Well it’s been over
6 months, half a year since that conversation and there has been no audit,
nor any more conversation from the Tether talking heads about doing one.
Tether and it’s backing is a pure example of centralized trust. Tether is basically saying,
just trust us…it’s fully backed…we will eventually do an audit, but they just keep kicking the can
down the road….but that isn’t even the full story of their centralization.
Tether can freeze funds. USDT and they have done it in the past. Now Tether originally
started out decentralized on the Omni Layer of Bitcoin…but in November of 2017..that all changed
because Tether had 31 million dollars stolen from the Tether treasury. So they changed OMNI core,
to block the stolen funds. Tether became centralized because their own security sucked.
Well freezing funds didn’t stop in 2017, halfway through 2020 they blacklisted and froze 22
Ethereum addresses and just a few days ago Tether froze 160 million in USDT…
And CTO of Tether, Paulo Ardoino admitted this centralization in 2020. He said “Tether USDt is
a centralized stablecoin as others. We have duties towards users, regulators and law enforcement.We
have anyway strict rules and parameters for action. We won't slip outside those”
Tether centralization goes way too far…but
what about the next coin on the centralized list. Solana?
Well Solana plays it like this isn’t the case…From their website they say. Decentralized and
unstoppable. Not only is Solana ultra-fast and low cost, it is censorship resistant. Meaning,
the network will remain open for applications to run freely and transactions will never be stopped.
Oh really?? Everyone should remember September 14th, when Solana went down for almost an
entire day. 17 hours the network was down and transactions were stopped. Then in December there
was a 6 hour stoppage, of which the Solana twitter announced blocks were stopped being produced and
they would need to restart the network. And then, to begin the year…January 5th, Solana had another
outage, causing degraded performance…and reportedly went down for another 4 hours.
Solana has gone down 3 times in 6 months.
Solana is stoppable which is a feature of centralization. So how is Solana centralized?
Well I actually covered this, Solana’s centralization the day before the first
major outage September 14th. Let’s just replay the important parts of that video.
Build a supercomputer or you put your node in a data center, of which a majority of
the nodes are doing. But let’s just say, you decide to build that supercomputer,
can you become an effective validator? Well, no you would need to spend more money..you
would need to get a stake of Solana on your node. Let’s listen to that previous video once again…
Yikes, is all Chico has to say. But don’t worry, the centralized chains and assets will cannibalize
themselves together. It’s already kind of happening. Per example….just a couple days
ago. The Binance exchange said that the Solana blockchain was congested
and withdrawals were halted and delayed. And FTX, who’s team Solana, at the same time was saying BSC
was congested….perfect place and timing for the spider man meme. Cheers I’ll see you next time