What exactly is a middleman and why does everybody hate them? - Crypto in Plain English - Episode 258 - by cryptohunt.it - Transcripts

September 23, 2022

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What exactly is a middleman and why does everybody hate them?

Welcome to the Cryptohunt Jam, where we spend one minute a day to explain crypto. In plain English. My name is Christian Byza, Co-Founder of Cryptohunt.it and I am your host of this daily show.

You’ll often hear that crypto cuts out the middleman, and somehow that is better. But what does that actually mean? Let’s take a quick look at what this means and why this sentiment is so prevalent in the crypto space.

In centralized systems, large players - such as banks and governments - naturally aggregate power. They sit between the interacting parties. That’s what we call a middleman.

To make things more efficient, these middlemen bundle transactions and services under one company or administration. And this often works really well: For example, well-designed laws can protect consumers from bad investment decisions. Or an efficient fraud detection algorithm can save you from the worst when your credit card gets stolen.

But it can go the other way: Governments can decide to act in a way that it harms you. In 2008, during the financial crisis, governments printed money and caused inflation. Or companies can simply decide to take your data and sell it to the highest bidder, like Facebook did.

Decentralization is essentially about cutting out the middlemen to avoid concentration of power. The distrust in these institutions led Satoshi Nakamoto to invent Bitcoin for example. And we can see how that is a tempting world view with everything that is going on.

But always ask yourself: How bad are these middlemen really? And what real value do they provide? We’ll let you be the judge, but the truth is probably somewhere in the middle!

Disclaimer: This podcast references our opinion and is for information purposes only. It is not intended to be investment advice. Do your own research and seek a duly licensed professional for investment advice.

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