by Salvador Casquero

Decentralization disrupts the very essence of the current paradigm; centralized authorities lending credibility to entities within a closed ecosystem. This proves to be one of the most valuable attributes of Blockchain technology.

As we stated in our previous post, this development has contributed to 2gether’s ambition to deliver two of the six core aspects within decentralized societies; decentralized finance and work. We are working towards incorporating two more; production (i.e. 3D Printing) and the other, decentralized energy production and distribution (i.e. Solar Panels).

To achieve decentralization, the blockchain process requires an inseparable component: the reward, which here consists of an economic incentive in crypto-currency format. This incentive is a unique characteristic of the pure blockchain when compared with DLT, affirming our belief in the former of the two technologies.

The reward is essential. Without it, none of the properties of decentralization, security, or immutability, among others, would exist. There is no decentralized blockchain without its reward. Similarly, there is no blockchain without an incentivized reward encouraging the contribution to the decentralized world; whether it be Bitcoin, Ethereum or the vast varieties of Altcoin. This is the base of Tokenomics and hence the basis of our 2GT coin.

Admittedly, when simplified, the centralized blockchain is nothing more than a system shared by permissioned nodes. It is a distributed database whereby the benefits of improved efficiency are limited compared to a normal database. However, it proves a vital aspect of future transition; it ensures that we are capable of reaching the future.

Today, the banking sector is centralized, secure and regulated, all of which is a direct result of near universal confidence. To deliver our promised role in the foreseeable future as “the banking platform for the collaborative and decentralized future”, we must develop the same universal confidence by overcoming the restrictions of today. This process requires that we operate within a centralized environment, with continuous developments towards our decentralized goal.

The real value of 2gether is being able to put together these two models; achieved through the use of 2GTs (find out about 2GTs here). From this, we will create a transitional platform from the centralized FIAT environment to the world of decentralized crypto and vice versa. We’d love to include you in our community where you can learn more.

When building a decentralized environment, you must initially operate within the centralized to complete the transition. This is enforced by the following seven points:

Scalability : Initially, Ethereum processed 20 transactions per second, while both Visa and MasterCard are capable of handling peaks of more than 25,000 transactions per second. Despite ongoing developments to expand scalability, the blockchain networks are not currently able to displace Visa or Mastercard, illustrating the need to operate within current centralized systems.

: Initially, Ethereum processed 20 transactions per second, while both Visa and MasterCard are capable of handling peaks of more than 25,000 transactions per second. Despite ongoing developments to expand scalability, the blockchain networks are not currently able to displace Visa or Mastercard, illustrating the need to operate within current centralized systems. Fees : An issue deriving from scalability, network fees prove the second reason behind the need for momentary centralization. During peak periods, the network struggles to handle the volume of transactions, resulting in a susceptibility to ‘sky rocketing’ of fees. In context, would you pay 0.20 € for chewing gum with a 5 € transaction fee? Unlikely. Here, a centralized blockchain bank better suits the requirements of daily transactions.

: An issue deriving from scalability, network fees prove the second reason behind the need for momentary centralization. During peak periods, the network struggles to handle the volume of transactions, resulting in a susceptibility to ‘sky rocketing’ of fees. In context, would you pay 0.20 € for chewing gum with a 5 € transaction fee? Unlikely. Here, a centralized blockchain bank better suits the requirements of daily transactions. Regulation : Granted, there are justified complaints, however, one cannot ignore that the current financial system has been working safely for many years. With the aim of protecting consumers, regulators are obliged to monitor financial services. Due to distrust and lack of knowledge, many regulators still prohibit banks from maintaining accounts in cryptocurrencies as they cannot protect consumers (e.g EBA attack 51%).

: Granted, there are justified complaints, however, one cannot ignore that the current financial system has been working safely for many years. With the aim of protecting consumers, regulators are obliged to monitor financial services. Due to distrust and lack of knowledge, many regulators still prohibit banks from maintaining accounts in cryptocurrencies as they cannot protect consumers (e.g EBA attack 51%). Adoption : Bad press and notorious attacks on centralized exchanges (e.g MtGox, Bitfinex) are creating a publicly cautious mentality regarding cryptocurrencies, particularly as official authorities have failed to both intervene and compensate the demands of lost investments. When money is at stake, people take longer to accept the risks of change. Despite the robustness of technology, fear — whether irrational or justified — greatly contributes to delay in the adoption of decentralized blockchain. If we are not immediately able to guarantee strong security and confidence, the associated costs of client acquisition could derail our project.

: Bad press and notorious attacks on centralized exchanges (e.g MtGox, Bitfinex) are creating a publicly cautious mentality regarding cryptocurrencies, particularly as official authorities have failed to both intervene and compensate the demands of lost investments. When money is at stake, people take longer to accept the risks of change. Despite the robustness of technology, fear — whether irrational or justified — greatly contributes to delay in the adoption of decentralized blockchain. If we are not immediately able to guarantee strong security and confidence, the associated costs of client acquisition could derail our project. Governability : Consensus is great, arguably better than central decisions as it empowers all of us to choose the best paths. However, at the climax of the euro crisis, it was a central authority -Mr. Draghi at the ECB meeting- who stopped the free fall of the system. What would happen if we build the 2gether financial platform over a decentralized blockchain only for the consensus to opt for ethereum classic, or ethereum zero? Should we follow ethereum’s original chain or subsequent forks?

: Consensus is great, arguably better than central decisions as it empowers all of us to choose the best paths. However, at the climax of the euro crisis, it was a central authority -Mr. Draghi at the ECB meeting- who stopped the free fall of the system. What would happen if we build the 2gether financial platform over a decentralized blockchain only for the consensus to opt for ethereum classic, or ethereum zero? Should we follow ethereum’s original chain or subsequent forks? Economics : An economy is about commerce, trading, exchanging and moving FIAT. To use a token or coin for digital bartering, as a digital representation of value, you must assure that there are crypto flows, both buying and selling. However, if you suspect that your bitcoin or ether will double its value, the incentive to commercially spend declines, thus decreasing the money flow required for a decentralized economy to work.

: An economy is about commerce, trading, exchanging and moving FIAT. To use a token or coin for digital bartering, as a digital representation of value, you must assure that there are crypto flows, both buying and selling. However, if you suspect that your bitcoin or ether will double its value, the incentive to commercially spend declines, thus decreasing the money flow required for a decentralized economy to work. Novelty: Although a minor reason, albeit relatively new and fully functioning, it has not been tested enough to move all of our finances on top of it.

This list of reasons varies; however, all affirm the belief that the blockchain framework, bank cores, regulators, clients, and the market are not currently ready for a decentralized blockchain bank.

So, no. One cannot build a decentralized bank yet.

However, that does not mean that steps towards a decentralized economy are impossible.