Decentralization in Cryptocurrencies (Essay Sample)
Essay 2: Choose ONE of the following essays (approx. 1,200 words)
“I'm sure that in 20 years there will either be very large transaction volume or no volume.”
Discuss this prediction from Satoshi made in 2010 in the light of the cryptocurrencies, developments like MPesa, and other government payment innovations like CBDCs that we see competing with Bitcoin today. Explain with reasoning some possible scenarios in 2030.
Discuss ‘decentralisation’ in cryptocurrencies, and answer the questions: what is decentralisation in this context? Can it realistically be said to be achieved? How do modern cryptographic processes like hash functions, digital signatures and zero knowledge protocols help the claim for decentralisation?
Consider the innovation of disruptive payment systems such as M-Pesa and analyse whether they hinder or promote the adoption of cryptocurrencies such as Bitcoin in emerging economies. Do the disruptive payment system innovations or cryptocurrencies such as Bitcoin promote the next steps in financial inclusion in emerging economies? Note that next steps in financial inclusion are different from access to basic financial inclusion.
Decentralization is a buzzword often associated with cryptocurrencies, particularly in the context of the underlying technology, blockchain (Glaser and Bezzenberger, 2015). It is often hailed as a key feature of cryptocurrencies, with proponents claiming that it offers greater security, transparency, and accessibility than traditional financial systems. But what does decentralization mean in the context of cryptocurrencies, and can it be achieved? In this essay, we will explore the concept of decentralization in cryptocurrencies, examining how modern cryptographic processes like hash functions, digital signatures, and zero-knowledge protocols help to support the claim for decentralization. Decentralization in the context of cryptocurrencies refers to the distribution of power and control across a network of nodes or participants rather than a centralized authority. No single entity, such as a government or financial institution, has complete control over the network and its operations. Instead, the network is managed by a network of nodes, each having an equal say in the decision-making process and the validation of transactions. One key advantage of decentralization in cryptocurrencies is that it offers greater security and resilience compared to centralized systems (Meckler and Shapiro, 2018). Since there is no single point of failure, the network is less vulnerable to attacks or disruptions. Additionally, decentralization can offer greater transparency, as all transactions are recorded on a public ledger, accessible to all nodes on the network. This can help to prevent fraud and corruption,
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