This Week in Crypto

Crypto things you didn’t know you didn’t know.

Decentralization Means More Responsibility, Not Less.

This seems to be a misconception about decentralization in general — if no one is “in charge” of P2P networks, that means all participants are absolved of any responsibility. Unfortunately it’s almost the opposite of the truth; decentralization increases each individual participant’s obligations.

Transacting on a network with no middleman or hierarchies to charge fees sounds like a great deal and in many ways it is. Decentralization can result in greater resiliency, as there is no central point of failure. Trustless networks can enable us to perform consensus without the need to know or trust the parties you transact with.

However, a decentralized system shifts many burdens and complexities to the end user. At the very least, users have to properly secure and protect their private keys. Users have to arrange for their own storage solutions as well as proving and protecting their identity with no support (discussed in greater detail below). Users might also end up being classified as a crypto business and thereby subject to privacy laws and even audits.

There’s a reason we’ve come to rely heavily on banks and other intermediaries: they abstract away many of these complexities for us. P2P is great as long as you’re willing to accept the responsibilities and manage the challenges that come with it — don’t expect a 1-800 number to call when something goes wrong.