Is the Majority of the Cryptocurrency Market Centralised? A Research Study Thinks So!

By Daniel Zo SEC, Fiat, ICO, Ethereum, Ripple, CryptoCompare

One of the biggest advantages that cryptocurrencies have over their fiat counterparts is the decentralized status, which provides higher security, reduces attack risks, and ensures that coins are not controlled by a central entity. Despite this aspect, recent research has concluded that the majority of digital assets available on the market are centralized.

To put things better into perspective, CryptoCompare, which is a market data aggregator, has recently published a digital asset analysis for over 200 coins. The authors analysed the digital assets from a variety of different perspectives, and using more than 30 attributes. When doing the analysis, researchers considered the supply concentration, distribution, market cap, governance, volume data, regulatory classification, and decentralized status of the coins.

Decentralized and centralized structures

One of the most interesting finds relates to the level of decentralization present on the market, which apparently, is as low as 16%. It’s important to keep in mind that researchers based their conclusion on the methods that regulators use to determine whether a digital asset is centralized, and hence considered a security offering. For instance, regulators mostly believe that open source and decentralized cryptocurrencies do not rely on a central issuer.

As such, the research has found that 55% of coins are considered centralized, whereas the remaining 29% is classed as semi-decentralized. When it comes down to tokens, the study has found that 37% only are decentralized. The classification goes one step further, since 9% of utility tokens are considered to be decentralised, whereas only 7% of financial tokens created by ICOs share the same status.

Things are a bit different with Bitcoin, which has been classified as a commodity by the U.S. Securities and Exchange Commission. Regardless, there are some who believe that China’s massive influence over the bitcoin mining market does increase the coin’s centralisation. The status of Ethereum is also interesting to look at. While it was initially classed as a security, a SEC judge has stated that it is no longer considered as such.

The research study wouldn’t be complete without studying Ripple, which remains one of the most prominent cryptos so far. At this time, Ripple Labs owns the bulk of the token, which has created fear amongst investors that the coin will soon be classed as a security. Because of this ownership, community members don’t think of XRP as fully decentralized, despite the numerous statements made by Ripple executives.