Lesson 7 — Who Does What? Why? Who Pays?
How Does Blockchain Actually Work?
Learning Material
1 pagesLesson 7 — Who Does What? Why? Who Pays?
Understanding the Complex: How Does Blockchain Actually Work?
Blockchain technology is often described as decentralized — no one in charge, no headquarters, no CEO. This is true in one sense and deeply misleading in another. The protocols are decentralized. The ecosystem built around them is not.
Understanding who is actually doing what — who's writing the code, who's funding it, who's regulating it, and who profits — gives you a more accurate picture of the technology than the pure-decentralization framing provides.
Protocol organizations
Bitcoin has no single controlling organization, but it does have the Bitcoin Core development team — a group of open-source contributors who maintain the reference implementation of the Bitcoin software. Changes to the protocol require rough consensus among developers, miners, and node operators, which makes Bitcoin famously conservative. Major changes — like the Segregated Witness upgrade in 2017, or the Taproot upgrade in 2021 — take years to develop and deploy.
The Bitcoin Foundation, established in 2012, attempted to act as a coordinating body but lost most of its influence and funding by 2015. Today, protocol development is funded through a combination of voluntary donations, grants from the Human Rights Foundation, and contributions from companies that build businesses on Bitcoin.
Ethereum is more explicitly governed. The Ethereum Foundation — based in Zug, Switzerland — employs dozens of researchers and developers and holds substantial reserves of Ether. Vitalik Buterin remains the most influential single voice in Ethereum development, though the ecosystem has diversified considerably. Major protocol decisions involve coordination between the Foundation, independent client teams, major staking providers, and the broader developer community.
Commercial infrastructure
The companies most people interact with are centralized, regulated businesses — despite operating in the "crypto" space.
Coinbase, listed on NASDAQ in April 2021, is a publicly traded US company that operates a regulated cryptocurrency exchange. Its business model is essentially brokerage: it takes fees on trades and custody services. It reports to the SEC, holds customer funds in segregated accounts, and complies with anti-money-laundering requirements.
Binance, the world's largest exchange by volume, has had a more complicated relationship with regulators. In 2023, its founder Changpeng Zhao pleaded guilty to US money-laundering charges and stepped down as CEO. The case illustrated a pattern: the largest centralized crypto businesses operate globally but are ultimately subject to the legal jurisdictions where they accept customers and hold banking relationships.
Government response: MiCA and beyond
Regulation arrived most comprehensively in Europe. The Markets in Crypto-Assets Regulation (MiCA) — passed by the European Parliament in April 2023 and phasing into full effect through 2024 — created a comprehensive licensing framework for crypto-asset service providers operating in the EU. It requires capital requirements, consumer protection measures, and full MiFID-equivalent regulation for stablecoins that achieve significant scale.
MiCA is the most complete crypto regulatory framework any major jurisdiction has enacted. It ended the "legal gray zone" that had characterized European crypto markets since Bitcoin's invention. Companies operating without licenses could face enforcement; companies with licenses gained regulatory certainty.
In the United States, the approach has been more fragmented. The SEC under Gary Gensler took an aggressive enforcement position — bringing cases against Coinbase, Binance, Ripple, and others on the theory that most crypto tokens qualify as unregistered securities. The Commodity Futures Trading Commission has claimed jurisdiction over Bitcoin and Ether as commodities. Congress has debated but not passed comprehensive legislation. The result is a regulatory environment characterized by enforcement actions rather than clear rules.
Central bank digital currencies
Perhaps the most significant institutional response to blockchain is the CBDC movement. More than 130 countries are actively researching or piloting central bank digital currencies — digital versions of national money, issued directly by central banks.
China's digital yuan (e-CNY) is the most advanced, having processed trillions of yuan in transactions through pilot programs in dozens of cities. The European Central Bank is in the investigative phase for a digital euro. The US Federal Reserve has published research but remained cautious about a retail digital dollar.
CBDCs use distributed ledger technology in some implementations, but they are the opposite of decentralized crypto in their design intent: they're issued by central banks, fully controlled by governments, and designed to operate within existing monetary policy frameworks. They represent governments learning from blockchain's technical innovations while maintaining sovereign control over currency.
Funding the open-source ecosystem
Who pays for the underlying infrastructure? The mix is complicated. Individual developers contribute voluntarily. Companies like Ethereum's Consensys or Bitcoin infrastructure firms fund development as a business interest. Grants from the Ethereum Foundation, the Cardano Foundation, and similar bodies support independent researchers. The US Department of Defense has funded blockchain security research. Academic institutions study the technology independently.
The result is an ecosystem that's neither fully public nor fully private — open-source infrastructure funded by a combination of idealists, businesses, and institutions with varying interests.
Next lesson: The four major controversies — Bitcoin's energy use, mining centralization, whether NFTs are art or fraud, and whether crypto should be banned at all.
Reading time: approx. 8–9 minutes