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Dogecoin Creator: Banks Will Kill Decentralization

Mainstream adoption could create a dystopian situation with the banks controlling society.

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Institutional investors have been one of the key goals for the cryptocurrency sector. You’d think it was the Second Coming, the amount people talk about it.

But what are the ramifications? According to Jackson Palmer, one of the main developers behind Dogecoin (DOGE), the time of the institutional investors won’t be one of adoption, but of invasion. It could attack the fundamental tenets of the space.

Palmer argues that most of the enthusiasm for the traditional financial services entering the space is misguided. In an opinion piece published today for Diar, a digital asset newsletter, he argues that institutions will take cryptocurrency away from its ideological roots.

They will directly challenge and overturn many of the sector’s efforts to decentralize.


What’s wrong with the crypto institutional investor?

Palmer notices a “concerning trend,” in which institutions – like Coinbase – are starting to become the de facto gatekeepers of blockchains. This not only puts them in a position of power, as Coinbase can suspend or remove users accounts on an in-house decision – it also presents a vulnerability.

If key exchanges were attacked, there would be repercussions across the entire sector. “If Coinbase.com is hijacked or taken offline, a user relying on that provider essentially loses their access to the decentralized Bitcoin network,” Palmer wrote.

Convenience and usability stand at the heart of what Palmer sees as the institutional takeover of crypto.  Transaction volumes are increasing, but instead of taking place ‘on-chain’, many are now taking place on private servers or through OTC desks. Although this keeps prices steady, there’s also the concern that transactions are no longer verifiable.

Similarly, Palmer points out that many are already beginning to offer ‘secure’ custodial services, for users to store their cryptocurrency holdings. Coinbase, Bakkt and Fidelity all offer some sort of storage service. Many don’t give users access to their private keys, meaning that the service provider can arbitrarily withhold funds. “In offering custodial services, these companies seek to centrally control and manage the wallets,” Palmer said. “Obscuring away the notion of private keys in the name of convenience.”


Is Jackson Palmer right?

It’s been too easy to look at the short-term effects of greater institutional involvement. If the big boys are using it, then it acts as a vindication. Despite the naysayers, the reasoning goes, it proves that there is inherent value in cryptocurrency.

But what Palmer says is interesting. It can be slow and expensive to send Bitcoin (BTC) transactions; no one would say it was the easiest of payment methods. That said, sacrificing decentralization for convenience could have a long-term negative effect on the sector. Crypto takes the power of money issuance out of the hands of government and into the hands of the private individual. It’s only a short conceptual step for companies to also issue their own currency.

Palmer fears current trends – like the creation of centralized stablecoins – could create a dangerous situation where for-profit companies control the money used in everyday life. Despite its promising beginnings to liberate the individual, it could actually tighten the screws. This, he says, could be “scarier than government-issued fiat.”

The internet was vaunted as the catalyst for greater freedom of expression, on a medium outside of the government’s reach. That is no longer true. The internet, and the ensuing technology, has allowed countries like China to enhance its surveillance technology dramatically. In America, Facebook knows us better than our best friends, our family… even ourselves.

Palmer does suggest there is hope. Privacy coins like Zcash (ZEC) stand against the institutional encroachment on blockchain. His fear is whether the community will prioritize morals over wealth.

Centuries ago, the Scottish wit Robert Burns wrote a poem bemoaning his country’s unification with England. Caledonia had lost out, and its proud spirit was crushed because its lord had been enamored of the potential private returns. “We’re bought and sold for English gold – Such a parcel of rogues in a nation!”

Scotland is still waiting for independence, 227 years later.

 

The author is invested in BTC, which is mentioned in this article.

 

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