Giant Bank Surprised: Eyes on This Altcoin!

Morgan Stanley argues that the crypto ecosystem is shifting to a less decentralized structure. The Bank’s report draws attention to the fact that 60% of validators are managed by only four companies. Therefore, following the Proof-of-Stake (PoS) transition, the chairman states that the blockchain of altcoin Ethereum has become more centralized.

“Crypto is losing its decentralized structure!”

Morgan Stanley (MS) released a research report Wednesday. The bank says in the report that the crypto ecosystem is becoming more decentralized. The report highlights that while the underlying blockchains themselves are not decentralized, the need to run the bulk of the blockchain on a single or small cluster of cloud providers becomes a potential risk as crypto regulation evolves.

The report says that 65% of Ethereum nodes are hosted in the cloud, and half of them use Amazon Web Services (AWS). He notes that if some service providers decide to censor certain affiliates or crypto works, it will happen. It also states that it’s possible for long server outages to make this an issue.

Morgan Stanley says the crypto ecosystem has evolved by “nurturing the underlying decentralized blockchains of many applications, codes, services, and companies,” causing parts of the ecosystem to become less decentralized and more dependent on personal services. The bank says this is not surprising. He says that “centralization is a natural evolution of the financialization of cryptocurrency markets.” However, this brings new challenges.

Is the leading altcoin centralizing too? As you follow on, chairman altcoin Ethereum switched to PoS with Merge last month. Since Merge, processes are now validated by validators. The report states that only four companies manage 60% of these validators. The Ethereum community is also aware of this centralization problem. In this direction, he is working on potential assays.

The largest decentralized autonomous organizations (DAOs) have also evolved to look more like centralized companies, the bank says. The report reveals that decentralized exchange Uniswap recently voted to set up a foundation consisting of a governing group, advisors and a council that manages its own financial budget. A DAO is a form of blockchain-based organization or company, often managed by a native crypto token. Holders of these tokens have the opportunity to vote on valuable issues directly related to the DAO. In this process, they often use smart contracts instead of traditional corporate structures.

The report also mentions that the digital asset market is developing crypto artifacts that comply with regulations and attract users. That’s why, he notes, it’s starting to look more like the central banking world. At the same time, classical finance (TradFi) is rapidly launching crypto artifacts to provide its customers with process-based services and other related offerings.

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