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Cryptocurrencies Managed Officially By Organizations
Cryptocurrency coins and tokens can be split into two broad categories management-wise; they either have an organization officially behind them or they do not.
As it currently stands, there are far more cryptocurrencies and, where applicable, their corresponding Distributed Ledger Technologies (DLTs) that are officially backed and supported by an organization.
Listed below are some of the advantages and disadvantages of having official management.
A vast majority of cryptocurrency coins and tokens currently revolve around projects that do not have a fully working product yet. Only when a cryptocurrency has enough utility does the option for independence from a managing organization become viable; the project would just be incomplete or non-existent otherwise.
Products don’t build themselves; there has to be an official team responsible for their development.
Even after development is complete, some projects simply cannot exist without a managing organization given the inherent nature of their respective business models.
Even if a project has the option of becoming fully autonomous, it would still benefit greatly from having an official team responsible for its smooth running. No DLT is perfect, and every so often, problems are bound to crop up. These problems, though rarely if ever large enough to compromise the entire system as can be clearly seen from the continued integrity of Bitcoin, would still be better dealt with by an officially responsible team that could charitably be assumed to have the system’s best interests at heart.
In order for any system to work efficiently, there has to be clear direction from some form of designated leadership. Some systems can still function without a leader, but they are unlikely to be as efficient as they could be. DLTs that do not have an official team behind them are essentially managed entirely by random groups of various sizes. Even if we were to charitably assume that these groups were all selflessly dedicated to the growth and flourishing of the project, disagreements may still arise about how the system should be advanced. These disagreements, if protracted, could affect future growth.
Disagreements are not always bad, and indeed even projects with an official team should still be partially managed by groups in the community especially when they start to mature. However, with the presence of clear leadership that oversees everything, disagreements and concerns would not simply linger but instead be definitively considered and dealt with.
As the saying goes, too many cooks spoil the broth.
While increased adoption can still happen without an official management team, it would be far more efficient and directed if there is one. Instead of waiting around for anyone willing to adopt the technology to step forward, a team can actively go out and promote their project to a targeted audience. They may even form official partnership deals with interested parties in the process.
Adoption of the project will therefore not only be swifter, but more targeted to relevant organizations as well.
This last advantage is by far the most intriguing and possibly controversial.
In the cryptocurrency world, decentralization is one of the central themes that crops up over and over again. It is the degree to which the actual operation of a DLT is distributed between different organizations and individuals. The more distributed the operation, the more decentralized a DLT is.
Through observation of early DLTs and the manner in which they’ve progressed over time, it is evident that operational power naturally tends to pool and grow within self-forming groups. So while the degree of decentralization does increase rapidly in the early stages of a DLT’s life, there comes a point of reversal where the continued organic growth of these groups would lead a DLT public ledger back towards greater centralization.
The way to counter this reverse trend towards centralization, therefore, is to engineer the DLT in such a way that decentralization is both achieved and maintained. Since the “re-centralization” of a DLT would happen if it is left alone without appropriate prior engineering and guidance, it logically follows that a responsible team would be required to guide the progression of the DLT towards a greater decentralized state.
This is the precise reason why so many DLTs that are managed by official organizations, though arguably not yet as decentralized as some of the more popular DLTs without managing organisations, would logically be far more decentralized in the future.
The last advantage that I’ve mentioned for cryptocurrencies being backed by organizations was that these can guide their DLTs towards a path of greater decentralization and indeed maintain it there, so why then is my very first disadvantage centralization?
If a DLT is fully managed by an organization, then that in itself is centralization. A bulk of the operational power is held by the managing organization so that it can actually do the job of managing the cryptocurrency and its DLT — at least in the early stages.
This brings up an interesting situation.
In order to achieve greater and maintained decentralization, therefore, a DLT has to first start off in a centralized manner. Being centralized, however, it does suffer the disadvantages that come with being centralized — some of which are listed below.
All other things being equal, cryptocurrencies that are backed by official organizations have a far higher possibility of complete failure than those that aren’t. This is because the organizations themselves are discrete centralized entities that can palpably run into failure — be it bankruptcy, severe disagreements between members of the organization, or anything else that can cause the organization to simply dissolve.
Needless to say, once a cryptocurrency’s managing organization disappears before its work is complete, that cryptocurrency doesn’t really stand a chance. On the contrary, cryptocurrencies without a single managing organization, assuming that they already have a considerable user base, actually do better when their biggest unofficial operational groups dissolve since that would translate to greater decentralization.
This disadvantage is similar to the one above and could also be the result of centralization.
Cryptocurrencies that are backed by organizations typically have large proportions of their supply held by that organization. This, in theory, allows them to “cash out” their tokens whenever they want and subsequently abandon their own cryptocurrency should they wish to do so.
As with failure, once betrayal happens, a cryptocurrency stands little chance of surviving on its own.
Many new cryptocurrencies and DLTs have teams supporting them, and indeed, apart from being an absolute necessity for a vast number of projects, having an official dedicated team boasts many advantages.
However, in keeping with the spirit of decentralization, there has to be a gradual shift in both operational power and supply distribution from the organization to the general public — the ultimate goal being that the distributed ledger in question is truly fair, decentralized, and well-adopted.
Hedera Hashgraph is a brand new enterprise-grade DLT that’s based in the United States. It’s a fine example of an organisation that’s guiding and engineering its public ledger into a state of maintained decentralisation through the Hedera Hashgraph Council.
You may view the team by clicking here.
There are many other impressive cryptocurrencies that are managed by official organisations — you just need to discover them for yourself.