Can Crypto Ever Come Under Control?
One of the core concepts driving the cryptocurrency and blockchain industry is that of control. The idea that this technology can help people gain autonomy over their finances and online activity is a major selling point for many, and it is seen as something that sets it apart from other industries.
However, there’s another way that control is discussed in the crypto space, taking a very different form. While the industry works to provide more self-sovereignty to the individual, there’s a heated and ongoing debate around whether crypto and blockchain tech can ever come under control.
This type of question can have several meanings. Control, in this context, could mean something regulatory, where institutions and organizations have a meaningful impact on how the industry acts and performs. It could refer to whether someone could seize the power of a blockchain and rule over it in an undemocratic way. Or, it could even mean whether the inherent volatility in cryptocurrency markets can be tamed and stabilized.
In some sense, when the topic of industry control arises, it often connects all three of these concepts together, as they all have overlapping elements. But is any type of control along these lines even possible? Let’s examine this concept of control, and see how feasible such a thing is.
What Makes Crypto So Unruly?
The factor that makes crypto so hard to control is what makes it so appealing worldwide. It’s a decentralized asset class, dispersed globally, with decisions made by anonymous and pseudonymous individuals voting on matters. There’s no clearly defined hierarchy, and for truly decentralized projects, there is no way for any one individual to halt or stop them.
It has been designed in a way that evades control in the conventional sense. This is what made Bitcoin so prominent at the start, and it is something that other cryptocurrencies have followed and emulated. They’ve made it so that control is hard to attain by essentially distributing it so far across its user base that it cannot be captured by one individual.
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However, this is not to say that control and power cannot exist within this industry. There are some individuals and organizations either trying to gain control or who may have the means to exert some level of power over the space. But this power is not absolute, in the sense that they cannot make grand decisions that must be enacted, unlike to how governments can change the nature of fiat. Instead, it is a more limited type of power that is nowhere near as far-reaching.
Ever since the crypto markets gained prominence, countless institutions and regulatory bodies have wanted to gain some semblance of control over it. They have wanted to restrict or limit it, or at the very least, fit it within pre-existing frameworks.
Depending on your view of regulation, this can be seen as a protective act, where organizations attempt to rein in some of the malicious or unfair aspects of crypto as a way of preventing retail traders from getting financially hurt. Alternatively, it can be seen as a way for centralized institutions to have their presence felt and gain some command over how the markets act and evolve.
The truth is likely a mix of the two. Some regulators view themselves as having a duty to safeguard the public within their jurisdiction, and others want to bring crypto within their control so that they can rule over aspects of it. However, to some extent, just because they have the intention to, does not mean they actually have the power to.
This is because crypto is not a monolithic structure with a clearly defined hierarchy or jurisdiction. The fact that the industry is spread globally, without any centralized authority pulling the strings, means that regulators are limited in their capabilities. The lack of a geographical center point for crypto activity means that no regulator can fully grasp it. Its dispersed nature means that different activities relate to different regulators.
This is arguably the first setback for regulators. The boundlessness of the industry prevents it from being fully controlled. However, that is not to say that regulations are impossible to impose– the SEC, and various other bodies, have instead chosen to build regulations around the aspects that do fall under their jurisdiction, such as any centralized companies or projects that operate from within their specific region.
For instance, if a centralized company launches a cryptocurrency operation, then the location of those who run it falls within the remit of regulatory action. One could argue this is a way that cryptocurrency can come under control, although actions like this tend to only affect a portion of the space, namely the companies that are centralized.
This is a very limited type of power because centralized companies are not exactly at the heart of the industry, but are rather appendages to the industry in the sense that they are working from a centralized perspective within a largely decentralized landscape.
The level of control companies possess is reflective of the control that regulatory bodies have. In other words, whatever a centralized company can do, a regulatory body can also intervene with. However, the power that a company holds over the markets is also limited.
For instance, leading centralized exchanges like Binance or Coinbase undoubtedly have some influence on the market, but they are merely components within this space, not its rulers. They possess influence, but the underlying cryptocurrencies that power this industry operate independently of them, and these companies can do little to control them. Therefore, regulatory bodies are also limited by this, as their power begins and ends with centralized companies.
However, this is not to say that they do not have a considerable impact on this space. For beginners, they are the first port of call for entering the market, and many advanced users still engage with them. Centralized companies are also the primary means of converting fiat to crypto, and vice versa, so they have control over the on and off-ramps within the markets.
If they all decided to close these ramps (or were pressured to by regulators around the world), then it would halt a lot of crypto entering or exiting the market. It would not stop it, however, as there is nothing preventing someone from selling their crypto for fiat in a peer-to-peer way (off-chain, as blockchains cannot handle fiat). This is just one example of how companies have control, as well as an example of how limited this control is.
Another way that companies exert control is by promoting certain cryptocurrencies or digital assets. They can push a certain coin or token to their user base, which makes a cryptocurrency more prominent and significant on a global scale. This promotion can even raise the price of these assets. It is less common nowadays, but several years ago, when a new asset got listed on Binance, its price would skyrocket for a moment. In this sense, these companies can be kingmakers.
That being said, the price increase might soon disappear if that cryptocurrency is found to be lackluster or unimpressive on a conceptual level. So even in this capacity, there are limitations to the influence companies have.
Exchanges are not the only companies in this space. There are also companies that run or manage certain cryptocurrencies. The largest of these is Ethereum. It is both a cryptocurrency and a separate company. It is a little difficult to explain, but these are two entities with massively overlapping elements.
For instance, Ethereum is a blockchain network that can run autonomously without any centralized bodies imposing any rules or changes. But Ethereum is also a company, with a corporate hierarchy and structure, with developers working towards updating the blockchain and making improvements to the ecosystem. It is very clear that Ethereum, as a company, has some control over Ethereum as a blockchain, and it can be hard to draw a line between the two.
This could suggest that the Ethereum company has control over the Ethereum blockchain, but this is more of a half-truth, as the blockchain can run without anyone overseeing it, yet the company does have the ability to enact changes or influence the overall market.
Another area where control can seep in is through money. This overlaps with company-specific power because those with significant financial resources can amass large amounts of a particular cryptocurrency, or they may already own large reserves. They can then theoretically use this money to make changes to the way the markets operate.
This type of power is not exclusive to cryptocurrency companies; it can emerge from any type of corporation, regardless of their relationship with blockchain tech. This has been a major concern for crypto enthusiasts since the markets started to gain traction.
A common example of when financial control is discussed is when the markets experience particularly large buy or sell orders on particular exchanges. These are often attributed to so-called whales—individuals or institutions that have either bought or sold a huge quantity of a cryptocurrency within the market.
These actions can cause a cryptocurrency to skyrocket in price if they choose to buy more of a cryptocurrency, or fall if they choose to sell their assets. This ripple effect occurs because databases and charts display the money entering or exiting the market, and if one person is buying or selling all at once, it can appear as a spike, which cascades into others following and reacting to that spike.
Sometimes activity like this can lead people to question whether an asset is being artificially pushed upwards or being suppressed. It can happen with big coins like Bitcoin and Ethereum, but the assets that are most vulnerable to this are smaller ones, where it is easier to amass a greater portion of them due to them being less popular (and therefore less globally dispersed).
This is a type of market manipulation, and it could certainly be considered a form of control. Ironically, this manipulation is relatively easy to perform by extremely wealthy parties because regulators cannot control the global and decentralized nature of cryptocurrency. So, in one sense, the lack of control that regulators have has led to a different type of control enacted by others.
It can be challenging to combat this type of manipulation in the crypto space, but it is not impossible. The fact that the market is filled with many retail investors, along with some early adopters that have a large portion of certain cryptocurrencies as they could acquire them cheaply in the past, means that there will be occasions where the average person can influence the market in a way that prevents or dulls any potential market manipulation.
There is another way that financial power emerges in this industry, and it is arguably even more insidious than market manipulation. For all of its decentralized protocols and global dispersion, permissionless blockchains tend to have a plutocratic streak baked directly into them. This is because, to vote on different actions or measures within a blockchain ecosystem, people often need to stake a certain amount of money or use expensive machinery to mine.
The vast majority of blockchains cannot implement a one-vote-per-person rule because there is no way to legitimately prevent one person from having two or more wallets or mining devices from which they vote. Instead, blockchains tend to count votes based on finances. This means that the more money a person has, the louder their voice is.
This is true for Bitcoin, Ethereum, and practically every cryptocurrency. If an asset is spread across the world and has a lot of active community members from a range of wealth brackets, then it can lessen the impact a little, but this problem never fully disappears.
Wealthier participants will always have more of a say in these blockchains, as money can equate to votes. This is unfortunate, although it does not necessarily mean that a blockchain is entirely in their hands, as this is not the same as 51% of all mining or staking power belonging to them. As long as there is enough dispersion and global distribution, this would not be possible, even if it does mean the wealthy can influence blockchain-based votes more.
If a situation did occur where 51% was owned by a tiny handful who all banded together, then it would equate to that blockchain being fully under control, but this would likely lead to everyone else flocking to another blockchain that has not been seized. In that sense, a blockchain might come under control, but the entire industry could not, as people would simply take their assets elsewhere. It may even lead to centralized exchanges delisting such a cryptocurrency, depending on what type of backlash was felt by the crypto community as a whole.
This leads us to perhaps the most significant way that the crypto space could come under control. Throughout this discussion, I have alluded to another type of power existing. This is in the form of media representation and activity. Cryptocurrency is very sensitive to the media. It is hard to pinpoint exactly why this is, but it could be because it is relatively new and so very little about it is entirely established.
For this reason, there are many different ways the industry can be interpreted. Its large demographic of retail investors, who do not have a formal financial education or experience in other financial markets, could contribute to this as well. In other words, people are looking for guidance and building their own perspectives on the job, so the words and ideas of others are naturally taken into consideration.
In essence, this means that the way the markets act and function can partially be in the hands of media corporations. The stories and viewpoints that the media pushes can easily have an impact on the space. You could even say that the crypto markets are necessarily intertwined with media by using Bitcoin’s Genesis block as a clear example.
Within this block, a message was encoded, pointing towards an article from The London Times, published on January 3rd, 2009, mentioning that the UK government was considering a second bailout for banks in the midst of the economic crisis that was happening at the time.
The media has always mattered to this industry, acting as a socio-economic barometer. When Bitcoin and crypto were starting out, negative press about it was used as fuel for investors, acting as a sign that they were rebelling against the conventional financial world. As the industry grew up, and the press began to sing its praises, it was used as a way of demonstrating that it had made a big enough impact to get financial corporations to listen.
But this is only one side of the discussion. Social media also has a huge influence on how crypto functions and behaves. Online social spaces like Twitter and Reddit have become tastemakers in this industry, with members of these online spheres pushing for certain coins and tokens to financially flourish. These are the digital locations where communities can speak their minds and try to instigate change.
They are also the locations where thought leaders can push their own perspectives and agendas. Vitalik Buterin, as I mentioned earlier, has used Twitter to share his thoughts in the past, helping to cement his position in the whole industry. Elon Musk, a more infamous example of a thought leader, has done the same– with his actions contributing to the prices of certain crypto assets shooting upwards.
Traditional and mainstream media can harness this power as well, by triggering fear via highlighting regulatory issues, promoting certain coins and tokens by placing them in the spotlight, or overall attempting to present a certain narrative. This is not to say that traditional media should not be trusted, as it is also a fantastic place to learn more about this industry, but rather a sign that all forms of media can push narratives, and that the sensitive nature of cryptocurrency means that the markets can often react to these narratives.
What makes media control so interesting is that it technically has the ability to control crypto on a wider scale because traditional corporations and social media platforms have a global outreach. Of course, the biggest saving grace here is that the media, like crypto, is not one monolithic structure, and so there will always be a plurality of viewpoints and perspectives available.
Pockets of Control Exist
If there is anything to take away from this discussion, it is that the crypto industry is not impervious to control, and that there are pockets of power that can emerge from certain spaces that exist within this sector. Regulatory bodies, companies, wealthy individuals, thought leaders, and media outlets all have some type of control.
Technically, if they all worked in unison, they could potentially place the entire crypto industry under control. But this is highly unlikely. These areas all overlap in some way, but they are all separate, with their own motives and desires. For them to all work together would require a level of coordination that is likely impossible.
What is important to highlight is that these areas all reveal vulnerabilities to the autonomy of the crypto space, even if complete and overwhelming control never actually forms. It shows a blueprint of how it could happen, but not a real roadmap. The global nature of crypto means that it would require a worldwide effort to control it, the likes of which would be extremely hard to pull off.
There is another way of viewing this discussion. It could also be argued that the crypto markets are already under control, but not by any of the entities currently named. Some would say that crypto is under the control of the people who use it. The participants of this space are the ones who take charge of it. They are the people it belongs to, and their actions are what drive it.
Crypto was created as a resistance to many of the forces listed; designed to be an asset for the people. Its decentralized nature gives power back to the individual, shifting away from the traditional systems that exist. While we should definitely be wary of people trying to put crypto under their own command, we should be aware that the structure of this technology is such that collectives of individuals have the power and ability to stave off such intrusions.
Crypto and blockchain tech is built with anti-control measures, such as distributed and decentralized voting, and peer-to-peer data transmission. It is borderless, lacking any hard-defined hierarchy, and above all, lacking any location of complete and centralized power. There may be ways to influence and steer the industry, but at its core, it is created to be immune from total authority.