Centralised vs Decentralised Crypto Guide

Almost immediately after you begin your journey intro crypto, you’ll hear the word ‘decentralised’ crop up. It’s a pretty fashionable buzz word in the crypto casino space, but it’s also very relevant and important to everyone who owns cryptocurrency.

Our guide to centralised and decentralised cryptocurrencies will explain exactly what these terms mean and highlight the pros and cons of using decentralised cryptocurrencies at the best online crypto casinos.

What Does Centralised Mean in Crypto Terms?

There are two types of organisation: centralised and decentralised. The same goes for crypto coins.

If an organisation is centralised, it has a clear hierarchy of power. Those at the top make all the important decisions, which has a big impact on people or employees lower down the chain.

In crypto terms, the clearest example of centralisation is a bank. If you want to transfer a large amount of money, this must be cleared with the organisation. They may force you to justify the payment, demand additional identification, cause delays, or reject it altogether.

The bank must follow one, centralised set of rules. They can’t make exceptions.

For example, let’s say the bank knows that everyone in a particular area receives their pay cheques on the 3rd of each month. Customers ask them to take payments on the 4th, instead of the 1st, so that they have time to be paid first.

As a centralised agency, the bank will follow the rules set out for it, and won’t work at a local level to make adjustments. This is in contrast to a decentralised agency, where the local bank manager would have the power to make those changes because he or she is familiar with the locals.

Decentralised Coins Explained

Decentralised cryptocurrencies have no single owner or single source of authority to control them. Instead, the code is open source (meaning anybody can use it) and decisions are made by the community.

You may see this referred to as Web3 Governance. This is a term used to explain how online groups can make joint decisions by voting on the best possible outcome for a coin.

If you’ve ever heard of EIP-1559, that’s a prime example of crypto decentralisation voting in action. In 2020, the Ethereum network was suffering from obscenely high fees, so much so that many lower-level investors were no longer able to buy tokens. It simply wasn’t worth paying $70 to get $20 worth of ETH. Some more complex gas fees were even pushing $400.

A proposal was put forward: EIP-1559. This would keep the fees lower and more stable, but some in the community were against it as they felt it would give an unfair advantage to stakers, who would see their relative holdings grow with the burning of tokens. A vote was held in which all ETH owners could participate. In August 2021, a hard fork was implemented so that EIP-1559 could go ahead.

Is Decentralisation Important at Crypto Casinos?

It’s only as important as you make it. If you don’t care who owns and runs the coin you’re using, and you’re not fussed about privacy or autonomy over your assets, it’s not important at all.

On the other hand, there are many people who got into crypto because they didn’t like the way governments and banks had been handling their funds. A key example would be the 2008 financial crisis, where banks encouraged people to take on massive debt and went bust before being bailed out by the government.

If you’d like an explanation which is longer than one paragraph, check out The Big Short.

We use the terms ‘centralised’ and ‘decentralised’ as if they’re black and white, but the reality is that there’s a big grey area in between. For example, if one person owns 100 tokens of a coin, and another person owns 1,000 tokens, the second person may have 10x as much voting power (depending on the setup of the voting community).

Pros and Cons of Decentralised Coins

Now that you have a full understanding of how centralisation vs decentralisation works, let’s take a look at the main pros and cons of decentralised cryptocurrencies: