Vitalik Buterin Banishes Centralized Exchanges to Hell

vitalik centralized exchange

It’s not often you get to see a Russian-Canadian programming wunderkind sentence centralized exchanges into hell, but attendees of TC Sessions: Blockchain got to see it live.

Vitalik Buterin, Co-Founder of Ethereum, captured the sentiments of a cryptocurrency community frustrated with the industry’s gravitation towards centralization by commenting “I definitely hope centralized exchanges go burn in hell as much as possible.”

Centralization has become an increasingly hot topic as numerous decentralized exchanges and decentralized projects have moved into testing and launching their projects. However, it’s worth taking a dive into the reasoning behind the animosity towards the centralized land.

The Good, The Bad, and The Centralized

For all the hate centralized exchanges get, the verdict is still out on whether they really deserve it. Without a centralized gateway for new users to get onboarded into the wildly confusing world of cryptocurrency ownership and trading, the industry would likely be at a mere fraction of what its current user base is today.

Sure, it’s easy to unleash the torches and pitchforks on an exchange like Coinbase for their relatively high transaction fees and customer service, but it does (or did) provide the best option for new users to dip their toes in the crypto water.

Don Mosites, Co-Founder of AirSwap notes, “Centralized exchanges require our trust in three ways — as a bank, broker, and clearinghouse. Because of this centralization, hacks, abuse and room for error increase dramatically.”

“Centralization is dangerous in the crypto ecosystem because it requires trusting an intermediary to create secure trading systems. You have to trust that operators will carefully handle your assets, settle transactions and execute your trades in an honest and compliant fashion.

However, it’s worth noting that many of the negative sentiments towards centralized exchanges are necessarily directed at the current exchanges as they are today, but more so towards the potential movement towards centralization for the industry as a whole.

With decentralized exchanges on the horizon, the debate among the guilded cryptocurrency elite and seasoned users rages against the formation of centralized powers growing too strong to stop.

One of the primary ethos for the cryptocurrency world is the concept of decentralization. A generation of Internet savvy users was so fed up with the frustrations and inadequacies of central banks and payment processing companies that they moved towards creating their own (decentralized) world. And yet, they’re seeing the same exact frustrations on the forefront of some of the most rapidly growing companies in the cryptocurrency space.

The Fight Against Concentration

Look – squirrel!

No, not that kind of concentration.

A major threat to the decentralized ecosystem is the concentration of power – a timeless fault of centralized systems.

Any single entity that holds the majority of power on a network not only requires an extremely high degree of trust to hold onto this gem of influence, it also turns out that this gem is actually a really hot potato that could be dropped at any moment.

A central figure is essentially target practice for malicious players looking to hit the jackpot. For example, a petty crook will generally have a much higher payout and getaway robbing the grocery store cashier rather than the dozens of customers around the story.

Editor’s note: Please don’t rob grocery stores. This is an example for entertainment and is not financial advice.

Even if we assume the highest altruistic values of a centralized entity in a decentralized network, the closer it gets to holding 51% control, the bigger a target they become for others.e

One of many different types of blockchain hacks, the 51% attack happens when a party owns the majority of hash power on a network, allowing them to mine blocks faster than the rest of the network combined and subsequently double-spend coins that have technically already been spent.

For example, Bitmain, the Bitcoin mining juggernauts, are becoming unnervingly close to owning 51% of the Bitcoin network hash rate. This has caused many people to start casting suspicious eyes at the Bitmain crew.

The jist of the argument against centralization aims at preserving the purity of a decentralized network that is absent from malicious third parties, immediate regulatory strangleholds, and profiteering monopolies.

Final Thoughts – Enter Decentralization

Decentralization, however, isn’t all sunshine and rainbows.

The current state of decentralization is a little more than embryonic. While there are a multitude of projects in the space working on awesome solutions that would ensure everything from decentralized exchanging of tokens, storage, and general network health, the technology is still being refined.

One of the core components of the current system of decentralization lacks is a fool-proof user interface.

A decentralized network generally relies on hundreds, thousands, or millions of independent entities supporting the network for their own mutual benefit.

But what happens when the individual entities in a decentralized network are about as effective as tadpoles on asphalt on a hot summer? The savviest tend to cluster, and the network generally tends to gravitate towards centralization.

“To define decentralized trade, you must first acknowledge the blockchain – and the nature of blockchain is decentralized. This ecosystem is built one layer on top of another as a stack. If the foundation of trade is broken, the ecosystem can not continue to develop beyond it.

To migrate the ecosystem toward decentralized trade we must eliminate risk and maintain parity – being good for market makers and providing good market coverage. That’s how we’ll move liquidity away from centralized systems into the hands of individuals.”

Don Mosites, AirSwap Co-Founder

There are solutions, such as the aforementioned AirSwap that aim to guide the cryptocurrency sphere through the trek from its current centralized exchange domination to a more decentralized trading ecosystem. If they will be effective in doing so, we’ll have to follow the macro-flow of users and ultimate efficacy of the platforms. 


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Alex Moskov is the Founder and Editor-in-Chief of CoinCentral. Alex leans on his formal educational background (BSBA with a Major in Finance from the University of Florida) and his on-the-ground experiences with cryptocurrency starting in 2012. Alex works with cryptocurrency and blockchain-based companies on content strategy and business development. He privately consults entrepreneurs and venture capitalists on movements within the cryptocurrency industry.

His writing has been seen in The Hustle, VentureBeat, Yahoo Finance, Harvard Business Review, and Business Insider. His articles on CoinCentral have been cited on publications like Forbes, TechCrunch, Vice,  The Guardian, Investopedia, The Motley Fool, Seeking Alpha, and more.

He also regrets not buying more Bitcoin back in 2012, just like you.

You can connect with Alex on Twitter.