For a long time, many have accused Ethereum of becoming "a banker chain". This is something that focused upon the base layer. A lot of it had to do with the coin distribution which affected governance along with the transaction fees.
It seems there is another layer that is going to be affected in a similar manner.
There is a backdoor into the second layer applications.
Developers and project owners have access to multi-sig wallets through which they can make changed to the protocol. This they could be subject to regulation in the future.
Since Ethereum is where most decentralized finance (DeFi) applications reside, this is big news. It seems that decentralization is getting harder to find within the world of cryptocurrency.
Wall Street Hijacking Being Aided
I made the case that some aspects are going to be hijacked by Wall Street.
Bitcoin distribution is going to be under the control of these financial institutions since it is a coin that is simply purchased. The network might be decentralized (although one could debate that might change in the future) yet the coins will be held by a handful of people. Fixed money historically always pooled.
Ethereum was going to be controlled since the base layer turned to coin voting. While this alone does guarantee that outcome, the fact there are a few wallets holding huge stake does. As we saw with Steem, that is a vulnerability that will be exploited eventually.
Now we are seeing the prospect that Arbitrum and Optimism failing to attain any decentralized goals due to backdoors. Even if they focus upon it, a case will be made that it is not decentralized.
Of course, the major stablecoins, Tether and USDC, are also in this camp. We know that assets can be frozen. These are run by centralized institutions which have access to all that is taking place.
In short, Vitalik is sitting on "Banking 2.0".
Opportunity for Hive
For close to two years I maintained how Hive had an opportunity to get into the financial realm in a big way. The idea of decentralized finance can still hold here.
There is a lot of development moving in this direction.
We have the Hive Savings account which allows users to stake Hive Backed Dollars (HBD), the ecosystem stablecoin, for a return that is generated by the blockchain. There is no single application or 3rd party that one has to go through. This not only eliminates regulation, it reduced counterparty risk.
Another feature is an open source, desktop wallet is being developed that will allow users full control of their assets. They will also be able to access the blockchain for this purpose without having to go through an application.
These are ideas that can be expanded upon. We repeatedly discussed the idea of Hive bonds which could offer another layer of fixed income products while also serving as collateral. This could be a foundation for a much wider DeFi buildout.
Very Little Decentralized
Hive is backing into the position it is in.
Without the Justin Sun attack, there is every chance the community went forward, waiting for Steemit Inc to do something. At the same time, the pre-mine still would be present, hanging over the community's head.
That said, the community forked after that episode and the direction we are heading is one that differs from most.
One big key is the lack of venture capital funding. Again, here is a layer of centralization that most do not realize.
To start, these firms are regulated, providing a point of vulnerability that cannot be overlooked. Then we have the fact they end up calling the shots. This is the proverbial money players versus user base. At some point, the money players want to get their return. This means monetizing the platform, usually at the expense of the users.
All of this means we are dealing with another layer of control.
No wonder people are questioning where Web 3.0 is. Not too many are truly working upon it.
Some have called projects like what Jack Dorsey is working on Web 2.5. The idea is he claims to be decentralized but is not. Perhaps we can apply that label to most of cryptocurrency.
It promotes the idea of decentralization but, when we really start looking into it, there are flaws that can be exploited.
Keep Focusing Upon Decentralization
Decentralization is not a destination but, rather, a direction. It is something that we have to keep working towards. The idea of open source, distribution, and redundancy are all applicable.
More is better in this regard.
Applications have to incorporate more of the base layer features. This will allow for users to have options. It also provides more resiliency.
Distribution of data is crucial. Hive offers this in text and we see SpkNetwork starting to address this concept for video and other forms of media.
It is a process but one that Hive appears to be pursuing. In the long run, this can really make it stand out.
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