Cryptocurrency, born from the ashes of the 2008 financial crisis with the creation of Bitcoin was intended to be a liberating force in finance. Centralization of cryptocurrency mining and market control. Growing centralization between cryptocurrency miners and markets. This trend, primarily inspired by American institutions and politicians, jeopardizes the democratic ideals that cryptocurrencies first promised to uphold. This centralization is particularly evident in Bitcoin mining, where just three mining pools are responsible for over 75% of the block production. At the same time, tech elites have re-established huge amounts of influence and shifted the entire cryptocurrency counter-narrative. In doing so, the US is deepening its lead as a force for good in global cryptocurrency adoption and development. Meanwhile, Europe is still far behind, putting the future of decentralized finance and its nascent promise to preserve democratic values at risk.
The Illusion of Decentralization
After all, one of the core tenets of cryptocurrency lies within its decentralized nature, granting the financial climate with a more democratic and equitable disposition. This utopian dream is radically undercut by the reality of 51% attacks. In these scenarios, an attacker or colluding attackers take over 51% of a cryptocurrency blockchain’s hashing power. In addition, the attacker is able to derive a very potent control over valid transactions. They can control, undermine, and undo the democratic promise of the cryptocurrency.
These attacks undercut the foundation of our democracy, the principle of ‘one person, one vote.’ They shape the consensus mechanisms that power cryptocurrencies. 51% attacks typically go after the smaller cryptocurrencies, since they are easier and cheaper to attack. This trend reveals a major weakness in the decentralized operational model. When a small number of people have disproportionate power, it undermines trust. This lack of trust and security is important when it comes to large-scale adoption of cryptocurrencies.
The centralization of Bitcoin mining only deepens this problem. Now, only six mining pools produce more than 80% of all Bitcoin blocks. As a result of increasing centralization, a handful of entities have all but absolute control over the network. Such a concentration of power causes alarm over possible collusion and manipulation. The hope and promise of a decentralized, democratic financial system powered by blockchain technology is rapidly being replaced with the dangers of this new concentrated power and control.
American Dominance in the Crypto Landscape
The United States has led in the global cryptocurrency market. It leads the nation in adoption, development, and innovation. That dominance is evident in a number of key metrics. In 2024, the US is still fourth worldwide in crypto adoption. This accomplishment positions it as the most progressive Western nation on the adoption of digital currencies.
Further evidence of this vibrant and active ecosystem ― nearly half (46%) of all blockchain start-ups are located in the US. IBM, Microsoft, and Coinbase, to name just a few, are major blockchain developers with headquarters in the US. This only deepens the country’s position as a primary epicenter for cryptocurrency innovation. American figures like Elon Musk, Peter Thiel, JD Vance and David Sacks are ascending to crypto leadership positions. Yet their influence underscores the bullying and regulatory stranglehold of this sector.
The extent of stablecoin market capitalization concentration and crypto-asset trading volume only serves to reinforce the US’s influence. As noted in a report by the European Banking Authority (EBA) and the European Securities and Markets Authority (ESMA), stablecoins and crypto-assets are largely concentrated in the US.
"nearly 90% of the total market capitalization of stablecoins" and "over 70% of the total volume of crypto-assets traded" - EBA and ESMA report
This concentration poses enormous risks by giving American firms and government an outsized control over the evolution of the cryptocurrency market and their regulation.
Europe's Lagging Adoption and the Future of Crypto
Unlike the United States, Europe’s cryptocurrency penetration is still quite modest. Just 1.6% of the EU population at large uses Decentralized Finance (DeFi), versus just over 2.2% of American adults. No longer able to lead the world, this lag in adoption begs the question of Europe’s ability to both participate in and shape the future of decentralized finance.
Crypto emerged from the techno-utopian fantasy of Silicon Valley in the 1990s and it was fueled by an idealistic belief that through the application of technology and software we can create a better more equitable society. With changes in technology came changes in vision. Cryptocurrencies are now being re-envisioned in the context of less utopian futures, with a focus on surviving crises rather than transforming society.
"Coins symbolize access to and control over tangible forms of value, physical manifestations of new sovereign orders." - Finn Brunton
Now, more than ever, tech elites are using their resources to pursue these parallel systems of power. This change is another symptom of a larger trend away from democratic institutions as a whole. Populism aside, Elon Musk, Peter Thiel and other powerful kingmakers are rising to prominence in the crypto space. This trend raises alarms that these technologies will exacerbate inequalities, concentrating wealth and power in the hands of a few. As detailed in the book "The Coming Age of Tech Trillionaires and the Challenge to Democracy," the growing influence of tech elites poses a significant threat to democratic values and institutions.
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