This is a perfectly normal doubt that many people ask themselves the first time they hear about the world of cryptocurrencies. Is Bitcoin a free market? Is BTC really decentralized, or is it all a lie?
It doesn’t matter if you know the answers to these questions. These are some doubts that we should always keep in mind, and from time to time, try to answer it again.
For what reason ?, to find out if the Blockchain network of the world’s first cryptocurrency really remains healthy. And to be aware of any possible danger, it may be around the corner and endanger our crypto ecosystem.
Well, you always have to doubt, you always have to ask yourself in order to answer with the truth. For, custom and unchallenged normalcy in the cradle for oppression and centralization. So, is Bitcoin a free market?
Are Bitcoin and cryptocurrencies a free market?
Is Bitcoin decentralized?
The simple answer is that “Yes”. But, as we said, you always have to doubt, question and answer: Why is BTC decentralized?
Bitcoin does not have a central control, which means that there is no central information repository, therefore, it does not have a CEO, or ringleader, nor a group of developers that control the crypto’s roadmap; as for example, it is true in Ethereum (ETH).
But, a reality that is important to say, is that a large part of the services and businesses built around Bitcoin are centralized. Which means that they are directed by people and teams, in specific locations, which can be regulated, censored and controlled.
Without a doubt, this situation creates doubts and tension both inside and outside the crypto ecosystem. In addition to a kind of irony of decentralization, since the oasis of decentralization and the free market, such as Bitcoin, is controlled by centralized entities.
So it leads us to always be very cautious of individuals who rise up in the Bitcoin ecosystem. And always bet on competition, the largest number of companies in the cryptoverse, and transparency.
For example, recently there has been a debate about the role that Binance is playing within the cryptoverse. Since the world’s largest crypto exchange, in the midst of the Coronavirus crisis has decided to expand its empire.
Doubting therefore about how free the Bitcoin market is, questioning whether it is indeed subjugated by CZ.
A fictional centralization for the free market
This is where the debate is as alive as it was on the first day, but some progress has been made. One of them is the difference between coercive centralization and market-based centralization.
For example, coercive centralization is what the traditional financial system is based on. The global monetary system is primarily based on fiat currencies created and administered by central banks.
And, it is coercive because the entities have a monopoly on the creation, regulation and transfer of that type of money at absolute will, in addition to the power to do with you what they want if you disobey it. Therefore, it can be seen that it is not a free market.
Therefore, they force us to pay taxes, pay off our debts, mortgage our homes. Even when they create money at will, for example, we recently have the case of the United States, and the European Union, which have printed billions of euros and dollars without any support.
The entire financial system as it exists today is based on this model of anti-market coercion: money moves only with the permission of those who have control and do not have it by mutual contract, but by the privilege of violence.
On the other hand, market-based decentralization, like what experts have said is Bitcoin, and many of the cryptocurrencies, its key feature is the ability to choose not to participate.
Yes, Binance and many of the crypto exchanges and other services within the crypto ecosystem have power. But, they are not needed exclusively to be able to use Bitcoin.
Whereas, the money that we have in our wallet, or bank account, will always be forced to use a centralized service.
A point in which we must all be honest, is the fact of the worrying centralization that BTC has when we talk about mining.
As we know, Bitcoin uses the Proof of Work (PoW) validation method, which is a double-edged sword.
The benefit of this type of method is the security it gives to the BTC Blockchain, which makes it the most secure network in our world.
The downside comes that mining BTC is done with brute force and in constant competition between miners. What generates that, in the first place, users have the incentive to accumulate computing power to win in this competition, in turn remove from the market those who do not have the money to compete, that is, it makes it exclusive.
The second is that the miners realized that by joining they could accumulate more and more computing power, and therefore more profit. This will generate the centralization of crypto mining processes.
In the beginning, Bitcoin was mined with CPUs in the houses or dormitories of university students. Today, an ASIC from one of these companies is required to be part of the mining process.
So is Bitcoin a free market?
The last point that we can mention here is the thesis that many detractors mention, such as the SEC itself. “The price of Bitcoin is very manipulable”.
Within the world of Bitcoin there are various double-edged weapons, which are an advantage like a curse. Another one has been the fact that the price of Bitcoin is generated solely by the law of supply and demand.
Therefore, an increase in its demand will generate an instantaneous price increase, and otherwise, if it is the supply that sees a boom, its price will decrease.
But, the simple ends here. If you have any deeper knowledge about the law of supply and demand, you will know that there are infinite factors that impact both. And that it is very complicated to separate the true factors that play with supply or demand.
For example, if there is a sudden increase in interest in Bitcoin (BTC) for whatever reason, that will result in crypto exchanges buying orders outnumber selling orders. Therefore, people who want to buy their BTC will have to do it at a higher price, and that will tend to increase the price.
And it is here that Big Whales (people with many Bitcoins) play a crucial role. These players were created either by billionaires who joined the world of cryptocurrencies, or by lucky geniuses who invested in BTC when it cost a few pennies.
These whales with a simple movement move the Bitcoin prices at their whim, and this is no secret to anyone. But does this make Bitcoin not a free market?
Nowhere is it written that having too many cryptocurrencies is a crime, or prohibited in the crypto ecosystem. And they also have every right to do what they want with their money.
Unlike world stock markets. If someone wants to ditch most of a company’s stock in a single exchange, most exchanges in the world would stop it. Is this a free market?
You are ready?
So yes, Bitcoin is a free market, there is no one to regulate or control it. And this has to be understood well, there are great players in the ecosystem that have millions of BTC, and the rules of a free market apply without any censorship, are you ready?