Cryptocurrency began as a safe space from fiat failure. Built by cypherpunks, it aimed to free money from banks, surveillance, and state control.
A decade later, crypto is no longer a resistance movement. It’s a financial product category.
Mainstream adoption has brought legitimacy, but also co-optation. Bitcoin and Ethereum have drifted far from their origins, not in technology, but in how they’re used, who controls them, and what they now represent.
Three Letters Changed Everything: KYC
Most people don’t interact with crypto through pseudonymous, decentralized tools. They use centralized exchanges (CEXs) like Coinbase and Binance that require government-issued ID and create permanent links between users and blockchain activity. Know Your Customer (KYC) requirements are now a standard across the industry.
Crypto was meant to be borderless and uncensorable. But today, centralized identity is inseparable from most on-chain activity. See Bitcoin Mining Pools Share of Hashrate below.
Three More: ETF
Bitcoin’s shift into a Wall Street asset marks the clearest ideological departure. The U.S. government now treats BTC as a strategic reserve asset. ETFs and corporate holdings have institutionalized it.
BTC is no longer just “magic internet money.” It’s digital gold that’s held in custody, traded via brokers, and offered through retirement portfolios.
And mining? It’s become industrial. Foundry controls nearly 29% of global hashrate, and over 50% belongs to just three pools. The decentralization once promised by proof-of-work now sits behind warehouse walls.
Ethereum: Staked and Captured
Ethereum’s switch to proof-of-stake didn’t decentralize the network. It concentrated it. Lido controls over 25% of staked ETH, and centralized exchanges like Coinbase and Binance together manage more than 14%. In total, over half of Ethereum’s consensus mechanism rests with just five actors.
This isn’t a distributed peer-to-peer system. It is infrastructure shaped by enterprise staking platforms. See Ethereum Validators’ Market Share below:
Even Privacy Coins Are Getting Absorbed
Privacy coins once stood as crypto’s ideological holdouts. Monero, for example, offers robust default anonymity and ASIC-resistant mining, but that hasn’t spared it from regulatory suppression. In 2024, Binance delisted Monero. The EU plans to ban it entirely for regulated firms by 2027.
Yet paradoxically, Monero’s market cap rose while its usage and trading access declined. This suggests a shift: privacy tools are increasingly viewed not as usable currencies, but as scarce, speculative assets.
Even resistance is being financialized.
The Final Blow: Stablecoins
Stablecoins like USDC represent the final stage of absorption. They’re fully compliant, dollar-backed, and serve as crypto’s bridge to the traditional banking system. Daily trading volumes exceed $10 billion. They don’t even try to disrupt the status quo. Tthey reinforce it.
And then there’s another example right by other top market cap coins, XRP. The coin is literally designed for banks and compliant with international financial messaging standards. It’s not just absorbed, it’s tailor-made for the institutions crypto was supposed to replace.
Evolution or Surrender?
If the goal was a censorship-resistant, anonymous global financial system, then crypto’s current trajectory represents a clear compromise. Surveillance is back. Institutions control the infrastructure. Privacy is marginalized.
But if the goal was to prove that monetary systems can function outside of governments, then crypto succeeded. It works. It has scaled. It’s everywhere.
Crypto wasn’t defeated. It was co-opted. Forked, one could say. And most of the self-proclaimed rebels welcomed the shift.
Notes
Key Terms Glossary
As last time, when preparing this article, I have referenced multiple terms that might be not widely familiar to you if you are not that deep into crypto. So, here is an FAQ-style glossary for those (yes, AI helped me with that):
- Custodian: A financial institution or entity responsible for holding and safeguarding assets on behalf of others, often seen with collateral for fiat-backed stablecoins.
- Cypherpunk: An individual or group advocating for the use of strong cryptography to promote privacy, freedom, and social change in a digital age, influential in the origins of cryptocurrency.
- ETF (Exchange-Traded Fund): An investment fund traded on stock exchanges, similar to stocks. Bitcoin ETFs allow investors to gain exposure to Bitcoin’s price without directly owning the cryptocurrency.
- Fiat-backed Stablecoin: A stablecoin whose value is pegged one-to-one to a traditional government-issued currency (fiat) like the US dollar, often backed by reserves of that currency or cash equivalents. See A Deep Dive into Crypto’s Most Promising—and Problematic—Asset Class
- Hash Rate: The total combined computational power used to mine and process transactions on a Proof of Work blockchain. A higher hash rate indicates more resources spent on greater network security.
- Know Your Customer (KYC): A set of regulations and procedures used by financial institutions to verify the identity of their clients, often requiring submission of personal identification.
- Market Capitalization (Market Cap): The total value of all circulating units of a cryptocurrency, calculated by multiplying the current price per unit by the total number of units in circulation.
- Monero (XMR): A privacy-focused cryptocurrency designed to provide complete anonymity for transactions by obscuring sender, receiver, and amount.
- Privacy Coins: A category of cryptocurrencies specifically designed with features to obscure transaction details, such as sender, receiver, and amount, thereby enhancing user anonymity.
Monero vs Bitcoin
It’s an interesting rabbit hole to go into, if you are interested in privacy coins. I used two videos with opposing views to help form my opinion. Here is a great video explaining Monero:
And here’s an alternative perspective:
