Cryptocurrencies and Custodial Wallets are Self-Contradictory
Bitcoin was invented to get rid of centralization.
When Bitcoin was invented, the sole purpose was decentralized peer-to-peer transfer of digital assets. The title says it all.
"Bitcoin: A Peer-to-Peer Electronic Cash System."
As of today, almost the entire cryptocurrency arena uses centralized cryptocurrency exchanges with custodial wallets!
Custodial wallets in the centralized cryptocurrency exchanges are as good as bank accounts under the fiat banks.
So, where remains decentralization in cryptocurrencies?
Whenever you use a centralized exchange, be it Binance, Coinbase, or any other, you are delegating all the power of your decentralized cryptocurrency cash in the hands of the centralized exchanges.
The centralized cryptocurrency exchanges own all rights of the custodial wallets and can do anything with your cryptocurrency holdings there!
Did Satoshi Nakamoto specify anywhere in the Bitcoin white paper that cryptocurrencies could be or would be under centralized exchanges and still be called decentralized peer-to-peer cash?
Did Satoshi Nakamoto recommend that centralized wallets be adopted for the convenience of cryptocurrency trading and selling?
The answer to the above questions is NO.
<> So, where remains the power of decentralization in cryptocurrencies?
Cryptocurrencies and custodial wallets are self-contradictory.
Do not criticize me because I write against the centralized cryptocurrency exchanges.
I strongly feel that cryptocurrency and custodial wallets in centralized exchanges are mutually contradictory.
Does that mean cryptocurrencies can't be used for trading and other real-world utility processes without adopting centralized exchange systems?
Does that mean cryptocurrencies heavily depend on traditional fiat banking systems?
Conclusion but not the final word.
Cryptocurrencies are real-world use cases of blockchains and distributed computing with a promise of decentralization.
As of today, the cryptocurrency community heavily depends on centralized cryptocurrency exchanges and their custodial wallet services.
Peer-to-peer transfer of cryptocurrencies is limited to a few merchants' payment systems and fund transfers using non-custodial cryptocurrency wallets.
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I am a researcher and contribute to the overlapping areas of STEAM (Science, Technology, Engineering, Arts, and Mathematics). I am an active user and promoter of GNU/Linux, Free and Open Source Software. I develop cybersecurity and information security solutions, specifically graphical authentication security.
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#cryptocurrency #blockchain #decentralization #centralized #wallets #fintech
Nov 21, 2023
I have said this many times. I have a simple understanding about Bitcoin especially when it first came out.
It's an online payment system that is similar to Paypal but without the third party in the middle like PayPal, or paying thru a bank. It's a true peer-to-peer system. (peer-to<-central exchange>-to-peer).
Thus, I agree with you, custodial wallets are like banks. They offer you to put your money in them to earn (just like depositing your money in a bank).