Cryptography and the Reduced Need for a Centralized Authority


The following article was written by Adinah Brown, content manager at Leverate.

Cryptography sounds like the kind of scientific endeavor that was created during the internet age, but in fact, it has existed for many, many years. It is defined in Wikipedia as “the practice and study of techniques for secure communication in the presence of third parties”. For as long as people have been trying to pass secrets in a coded way, cryptography has existed.

So, to put it in non-technological context, if you spoke pig-latin to your friends so that you kid sister couldn’t understand what you were saying, you were practicing cryptography.

It doesn’t take long to think of examples of cryptography throughout the ages, since most of us have watched movies like “Enigma”, which details the British efforts to break the German cipher during World War II. The process of creating a cipher is called encryption, again a term now almost fully associated with technology.

The reason that the words have been appropriated by technology is because the movement of technology and protection of data is a significant necessity. Protection of data means protection of personal information, intellectual property, money, in fact, almost everything as life transitions more significantly into technological realm.

Even prior to the recent availability of cryptocurrencies, there was intense discussion about the need to create a secure, peer to peer network for transportation of data. Vitalik Buterin, one of the founders of Ethereum, highlighted that even in the 80s and 90s this issue was very much on the mind of one particularly influential group. In a recent speech at the Blockchain.NZ conference, he pointed out that “The goal of the original cyberpunk movement basically is, can we use cryptography in order to reduce the need for central authority?”

From this perspective, the advent of cryptocurrencies was as much about the ability to transfer money in a peer to peer manner as it was to subvert the current social and economic order.

The interest in cryptocurrencies by the early developers is very much linked with removing the power of a centralized authority. Rather than simply a method of transferring money or money credits easily and efficiently, the main purpose was to subvert the current economic establishment that put the centralized national monetary authorities in control of financial transactions.

Clearly, much of the early Bitcoin adopters feel the same way about the need to create an alternative to a centralized monetary authority. The construction of the Bitcoin blockchain technology and much of the commentary from Bitcoin enthusiasts, focuses on the immunity of Bitcoin from central bank decisions.

Originally this seemed like the kind of anti-establishment rhetoric that you tend to hear from fringe groups, but when seen through the prism of the cyberpunk movement, it shows that this element of decentralization is the critical factor because of its impact on central authorities.

Assuming cryptocurrencies become a dominant player as a money alternative, the power of central banks will erode. Centralization of monetary policy is not unlike any centralized power, it gives control to a few people. The purpose of centralized power for monetary policy is to have an entity that can impact the economy. The idea is that this authority can ensure that the economy continues to run smoothly, create growth when needed to prevent recession and control growth to prevent inflation.

Today, centralized authorities have in many ways become somewhat decentralized. With the advent of significant international trade, central monetary authorities now stand as much a part of a decentralized system of international monetary authorities as it does function as a purely centralized authority.

The difference between true decentralization and the current system is that today, the central authorities are designed to protect the economic interests of a geographical area. True, decentralization will take away the element of protection even more. Whilst this mi25ght be the goal of a more pure market based system, it does contain the seed of potential unchecked inequality. Whilst this is certainly the case today where corruption amongst central authorities has the ability to do even more damage than a pure decentralized system, it does herald the beginning of an awesome shift in monetary control that threatens to change the world.

Only time will tell whether decentralization becomes a force for good and stability and not a force towards fear and greed.

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