October 7th 2022 - Centralisation vs. Decentralisation in the Age of Uncertainty

One of the most important dilemmas anyone can be faced with is between freedom and security. This can apply to the cryptosphere, despite it is founded on notions of freedom and self-sovereignty.

This dilemma became increasingly relevant in light of recent events, when the entire space of cryptocurrency enthusiasts is faced with prospect of increased regulation, KYC requirements and even sanctions against people and entities certain states consider “problematic”. This also corresponds to escalating debate between proponents of Proof of Work and Proof and Stake, the latter being accused of advocating centralisation, government and corporate control in what was supposed to be domain of individual freedom.

The latest incident with Binance would probably further intensify this debate. The exchange that was something like island of stability in troubled sea of bear market became target of successful hacking. The incident was so severe that its own blockchain had to be halted. While similar things happened with other blockchains, none of them was as big and popular as Binance and, consequently, repercussions were much more severe.

Binance, to its credit, reacted quickly. Halting the blockchain was apparently necessary to prevent further damage and the validators ultimately managed to repair the code and re-establish the blockchain. BNB and BSC blockchain users will be able to continue with their regular activities.

While the incident represents serious blow to the reputation of Binance, showing that it can be as vulnerable to attack as minor exchanges and minor blockchains, it also shows benefits of centralisation. The centralised exchange and its centralised blockchain were, unlike in some previous instances, in good hands, which allowed for quick and decisive action. Damage that could have been apocalyptic was prevented, at least for the time being. Many would argue that it wouldn’t have happened with decentralised exchanges and decentralised blockchains. They could have reacted to hostile actions with much bigger delays and less ability to prevent cascading collapse.

While it is futile to expect clear outcome of those debates, today’s incident is a reminder that cryptosphere shouldn’t take anything for granted. And that applies to exchanges, blockchains and real and alleged benefits of decentralisation vs. centralisation.

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