Cryptocurrency’s transparency is a mirage: New research shows a small group of insiders influence its value

United States President Donald Trump recently announced the U.S. would establish a strategic cryptocurrency reserve of Bitcoin, Ether, Ripple, Solana and Cardano. This move, he said, would make the U.S. “the crypto capital of the world.”
Once a vocal crypto-skeptic, Trump now frames his support as an embrace of technologies that champion freedom and innovation.
However, the problem with Trump’s view is that it assumes crypto will lead to the elimination of financial intermediaries. By replacing trust with transparency, cryptocurrency promises to put individuals in charge of their monetary transactions.
Our research demonstrates that this is only a partial view. In reality, crypto is dependent on social practices behind the technology.
Crypto-believers often blame greedy financiers as the cause of the Great Recession in 2008. But we argue that crypto is not immune to these same risks.
Replacing trust with transparency
Cryptocurrencies are a type of digital money that trades on a blockchain. A blockchain is a decentralized ledger technology that allows users to trade pseudo-anonymously.
Public blockchains operate on a distributed peer-to-peer network. This network provides each user a complete record of transactions that is updated in real time. Users can send digital cash between themselves without relying on a centralized authority.
Since each user has a full record of transactions, the system promises full transparency. But our research demonstrates that public blockchains, and the cryptocurrencies that run on them, do not actually replace trust with transparency.
Speculation, manipulation and market crashes remain very real dangers, regardless of whether the financial system is centralized or decentralized.
Cryptocurrencies rely on people
We studied the communications between the founder of Bitcoin, Satoshi Nakamoto, and the early Bitcoin community. We found the development and implementation of cryptocurrencies relies on negotiations between individuals. Who has a final say on which line of code will prevail depends on a social hierarchy dominated by insiders.
Centralization of power in the hands of insiders is still a major issue in the cryptocurrency space. This is particularly an issue for emerging cryptocurrencies like memecoins. Memecoins are a type of cryptocurrency named after internet memes or similar jokes. They draw their value entirely from speculation.
The Trump Organization recently launched memecoins $TRUMP and $MELANIA. The U.S. Securities and Exchange Commission has concluded that memecoins do not qualify as securities, and therefore are outside its regulatory purview. Not only are memecoins risky, but they come with a significant risk of insider trading.