What Are The Two Worlds Of Crypto?

(Photo by Jack Taylor/Getty Images)

For most people cryptocurrency is a mysterious thing. It’s magic money. To some it is a dream, to others it is a nightmare.

Yet there are two increasingly large divides growing in this new space. One divide is decentralized coins versus centralized coins. Then there is the gulf between coins and tokens.

These divisions are important. Bitcoin is a decentralized coin. Ripple is a centralized coin. Essentially, the difference represents two poles of a political arc. Centralization represents the established world where power radiates from the middle and is dealt by an elite. Oligarchs, bureaucratic mandarins, aristocrats, royal families, political representatives--it’s the same old system of power distribution we all hate to love.

[Ed note: Investing in cryptocoins or tokens is highly speculative and the market is largely unregulated. Anyone considering it should be prepared to lose their entire investment.]

Decentralization is where, like the origins of the internet revolution, power is distributed across an organic and ever-shifting network. Most would consider it an anarchy, in the derogatory sense and more interestingly in the political sense.

The polar difference between centralized and decentralized is an old schism; each threatens the well-being of the other. In history it was monarchists versus republicans, anarchists versus totalitarians, dictatorship versus democracy. Any system controlling the allocation of resources is the battlefield of politics and blockchains are where computing meets politics.

But let’s forget politics, let’s stick to thinking about money. So which quadrants are going to hold the long-term value?

For a start tokens are not cryptocurrencies, they are securities. So right there you can bifurcate the universe of crypto. When you buy a token you are buying part of an enterprise, virtual or otherwise. When you buy a crypto coin, you buy money.

When you buy a token you will do as well as the undertaking does and if you invest in a ‘cold fusion’ ICO (and there is one, I kid you not) you will lose your shirt. If you fund a great business via their token you will do well. It’s the same game as stock picking, just wildly more risky.