Follow On Google News

Will Bitcoin Become the First Monopoly in Global Decentralized Economy

Key Takeaways

  • It took the fall of FTX along with the loss of billions of customer funds to make us realize that decentralization is the true way for democratizing finance

  • From all the decentralized trading happening in the world, blockchain protocols are responsible for more than 45% of total transactions

  • One can understand the significance of Bitcoin by the fact that its market capitalization has reached over $1.2 trillion during the last bull run. 


14 Nov 2022 By : Sudeep Saxena
Southeast Asia’s Lar

The recent market movements in the industry have started the discussion on the future of centralized trade in cryptocurrencies. The concept of cryptocurrencies started with an aim of decentralizing money and giving back control to the masses. But as the market developed, centralized players strengthened their authority and the goal of decentralizing the power faded away in the glory of billions of dollars of unregulated money movement.

However, everyone in the industry woke up from their deep sleep when a heavy-weight centralized exchange got into dust in a matter of few days. It took the fall of FTX along with the loss of billions of customer funds to make us realize that decentralization is the true way for democratizing finance.

Amidst this chaos, the role of DeFi and Bitcoin becomes more important than ever. Bitcoin has always been the currency that has given a strong back to fall on during the roughest of bear markets. Even after the fall of FTX, investors shifted their focus to Bitcoin, leading it toward a potential monopoly in the DeFi ecosystem.

The Rise of Decentralization

Nobody has ever thought that the decentralization of money would ever be possible anytime soon. But things changed when blockchain innovation and cryptocurrencies came together to create a completely new economy. Decentralized finance is becoming the bedrock of internet trade, however, the majority of the crypto transactions still happen through centralized channels. 

The present global DeFi market size was valued at $11.78 billion in 2021 and is expected to increase at a compound growth annual rate of 42.5% from 2022 to 2030. On the other hand, the fall of a leading centralized exchange has made people more aware of the fact that centralized cryptocurrency holdings are no better than holding money in your banks. 

The cost of an unregulated and centralized crypto space only empowers the decision-makers of the platform to manipulate the money within their ecosystem. With no transparency whatsoever, the trust of the investors is shifting away from centralized exchanges to decentralized platforms.

From all the decentralized trading happening in the world, blockchain protocols are responsible for more than 45% of total transactions. This indicates the significance of cryptocurrencies and Bitcoin in the future of decentralized finance. 

Bitcoin: The Pillar of Decentralized Trade

We live in a time when Bitcoin has become the synonym for decentralized trade in layman's terms. One can understand the significance of Bitcoin by the fact that its market capitalization has reached over $1.2 trillion during the last bull run. This is higher than the total market cap of cryptocurrencies right now. 

Bitcoin blockchain network records a sum of over 250K transactions each day even after having an average throughput time of 40 minutes. Bitcoin has also been able to establish itself in 78 countries with  38K+ ATMs installed and working. South American country, El Salvador, has gone to the extent to become the first country to make Bitcoin a legal tender in their economy.

Hundreds of billions of dollars also account for Total Volume Locked (TVL) in DeFi protocols for different operations. From lending to staking, people are willing to learn the technical aspects of blockchain and adapt it to their lives. People from the Central African Republic are an example of the same and as a result, Bitcoin is a legal tender in their country. 

All this information when summed up directs toward the increasing relevance of Bitcoin in a world where most financial institutions are under the influence of one or the other. From the day of its origin, the Bitcoin community stood by the cause of decentralization, and shared resources in the community became the breeding ground for new free and open-source innovation.

Problems in the Mass Adoption of Bitcoin

Bitcoin adoption has already started in the world and institutional players such as MicroStrategy, Galaxy Digital, Voyager, Tesla, and others are holding major of this crypto gold. However, there are some spaces in its mechanism that are yet to be filled. Here are some of the problems that are restricting the mass adoption of Bitcoin.

Cost of Transaction

The cost associated with the Bitcoin transaction was not a part of its mechanism since the beginning. However, this changed when the congestion on the network increased with time. Bitcoin transactions could take a long if not incentivized by a transaction cost. 

Even though these incentives can make important transactions happen just in time, the time taken by regular transactions increases drastically. Not to mention the power consumed during validating these transactions. 

Volatility

The price volatility of Bitcoin is another bone of contention for those who do not want to hold their assets in fragile investments. Bitcoin had a steep fall since the last bull run and aggressive price fluctuations have become a characteristic of Bitcoin. For Bitcoin to become a standard for international decentralized trade, it has to overcome its volatility, however, it would be possible only with time. 

To know how to manage market volatility - Read this blog.

Integration

Ethereum, the second-largest blockchain network in the world overtakes Bitcoin when it comes to blockchain development. Bitcoin is not a development protocol and that is why it does not integrate with DApps as easily as Ethereum does. This creates a gap between the user's ability to interact with the chain and restricts the movement using bridging protocols. 

Will Bitcoin Become a Monopoly in Decentralized Trade?

Even amidst the worst time for cryptocurrencies, Bitcoin is anchoring the crypto market and leading the space singlehandedly. Even though there are some problems in its mechanism, all of them could be solved over time by the community. The best of the brains in the industry are working tirelessly to make Bitcoin a better blockchain for diverse operations. 

Bitcoin is an undisputed leader in the industry and further developments are surely going to make its stance stronger in the trade. The monopoly of Bitcoin is inevitable in the industry as its dominance is only going to increase with time. However, the blockchain industry is highly unpredictable and we are always excited to explore new developments at CoinGabbar.

Will Bitcoin be able to become a monopoly in international trade? Or can it be replaced by any other blockchain? Share your views in the comments below.


WHAT'S YOUR OPINION?