The centralization of cryptocurrencies turned out to be too high
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The centralization of cryptocurrencies turned out to be too high

Proponents of cryptocurrencies believe that decentralization is their main advantage over other financial systems: no company, bank or government has control over them. The US Defense Advanced Research Projects Agency (DARPA) commissioned a study, the results of which are available showed (PDF) that this is not entirely true and that decentralized cryptocurrency schemes often exhibit “elements of unintended centralization.”

    Image Source: Tamim Tarin / pixabay.com

Image Source: Tamim Tarin / pixabay.com

The study was conducted by experts from Trail of Bits, a company specializing in cybersecurity issues. They found that power over cryptocurrency networks belongs to individuals who hold large amounts of digital “coins” — this could give them the theoretical ability to intervene in distributed ledger records containing asset ownership information.

The report also states that 60% of all Bitcoin traffic is handled by just three ISPs, and if a regulator, hacker, or anyone else in control of any of those companies decides to slow cryptocurrency traffic or blocking it could adversely affect the operation of the entire network.

Experts also noted flaws in the Bitcoin network itself: 21% of nodes use an outdated, vulnerable version of the client. This means that the entire network can become a target for an attacker looking to gain control of a portion of the blockchain. All of these scenarios seem unlikely given the size of the Bitcoin network, but it would be unwise to ignore the shortcomings of cryptocurrency networks.

About the author

Robbie Elmers

Robbie Elmers is a staff writer for Tech News Space, covering software, applications and services.

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