Are Bitcoin intermediaries necessary? Are they good?

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Bitcoin and other cryptocurrencies were created for the “decentralization” they provide as they do not need a central medium for operations. The cryptocurrencies operate independently and hence have no use for intermediaries. Regardless, the most value in the cryptocurrency industry is accumulated by these intermediaries.

Bitcoin Intermediaries vs Meltem Demirors

Coinshares Chief Strategy Officer Meltem Demirors dedicated a thread of Twitter posts to addressing the issue. Demirors highlighted the difference between cryptocurrency’s vision and the industry’s reality. Although people may prefer privacy and independence intermediaries still control the majority of the industry’s value.

Furthermore, as more business models appear catering to all kinds of customers, power is still kept with those who control the coins. Currently, intermediaries control over seventeen percent of Bitcoin currently in supply. This is a conservative estimate yet the percentage is very significant.

Demirors elucidated that if a small number of companies hold a large sum the risk is maximized. If a company holding a large number of assets is breached the loss will be critical.

For the traditional markets, this is dangerous but not critical. However, for Crypto markets, this is critical for example a company with five percent or more Bitcoin the damage to the markets would be inconceivable. We already have an example in Binance’s hack that terrified the industry despite Binance only holding around 0.03 percent of the current circulation.

Demirors then asked what would happen when these intermediaries put cryptocurrencies into cold storages and start trading Bitcoin depositary receipts (BDRs). Would that still count as Bitcoin? No according to Demirors.

Disclaimer. The information provided is not trading advice. Cryptopolitan.com holds no liability for any investments made based on the information provided on this page. We strongly recommend independent research and/or consultation with a qualified professional before making any investment decisions.

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