Crypto and Decentralization are becoming Incoherent: Morgan Stanley

Sahana Kiran
Source – Unsplash

The crypto-verse was started back in 2009 with Bitcoin [BTC]. Satoshi Nakamoto rolled out the first cryptocurrency with decentralization as its ethos. Initially, this was the crypto industry’s USP. With time, a plethora of projects made their debut in the market. However, not all these networks were abiding by the laws of decentralization. At least Morgan Stanley’s latest research report says so.

The demand for digital assets witnessed immense growth over the last couple of months. This caused regulators from across the globe to take a keen interest in the industry. With regulators exploring crypto shores, holding up decentralization becomes quite tricky.

The Morgan Stanley report further noted how the underlying blockchains are decentralized. However, with regulators at play, having to run a significant portion of the blockchain on one or a limited number of cloud providers poses a risk.

The report also notes how this wasn’t too surprising. Morgan Stanley suggested that “centralization is a natural evolution of the financialization of cryptocurrency markets.”

According to Morgan Stanley, as the crypto ecosystem has developed, various apps, codes, services, and enterprises feeding into the core decentralized blockchains have led to some ecosystem components becoming less decentralized and more reliant on specific services.

Ethereum’s shift to PoS paints the network in centralization

Transactions are now validated by validators since the Ethereum blockchain switched to proof-of-stake [PoS] in September, through the Merge. According to the research, 60 percent of these validators are operated by just four organizations.

While the entire crypto community called out the network for its level of centralization, the Ethereum network agreed to the same. The network was even evaluating solutions for this issue.

In addition to this, Morgan Stanley noted that even decentralized autonomous organizations [DAOs] were also steering away from decentralization. The bank used Uniswap’s latest move in setting up a foundation that included, A foundation with a management team, advisors, and a board in charge of overseeing their own financial budget.