Decentralisation Explained by 5 Industry Experts
What Is Blockchain Decentralisation and Why Do We Need It?
At its purest, decentralisation is the concept of one central authority not having control of an entire system. It is a concept seen in business, politics, and technology including (but not limited to) blockchain and cryptocurrencies.
Blockchain decentralisation provides several benefits when compared to centralised systems.
- Fault tolerance – the system is less likely to fail accidentally as they rely on many separate components. However, it is only useful if the client software is bug-free.
- Trustlessness – cryptography replaces third parties as guarantors of trust. Smart contracts ensure specified terms are met before executing the contract, for example.
- Attack resistant – decentralised systems are expensive to attack as there is no central point of control; one must attack many locations simultaneously. Therefore, it is a more secure form of data storage.
- Honesty and accuracy – it is essential for information to be stored in a tamper-proof manner to ensure the accuracy of the ledger. With a centralised system, it is far easier to alter records.
- Collusion resistant – it is challenging for users to coordinate together to act in ways that benefit them at the expense of others. Think, 51% attacks, for example.
- Distribution – secure data distribution is beneficial for industries such as healthcare and insurance. For example, if someone has an accident overseas and must lodge a claim, both the healthcare and insurance providers could easily access the relevant records stored in blockchain ledgers.
So, how do blockchain and cryptocurrency experts view decentralisation? Let’s find out.
Vitalik Buterin, Ethereum Co-Founder, Bitcoin Magazine Co-Founder
Vitalik Buturin describes decentralisation as existing in three different forms: architectural, political and logical. He notes that thousands of research hours and billions of dollars have been spent attempting to achieve, protect, and improve decentralisation.
- Architectural decentralisation – the number of physical computers that make up a system. Also, how many of those computers can break down simultaneously before the system fails?
- Political decentralisation – how many individuals/ organisations have control over the system?
- Logical decentralisation – is the interface and data structure one single indivisible piece, or does it lack a clear structure? “If you cut the system in half, including both providers and users, will both halves continue to fully operate as independent units?”
“Blockchains are politically decentralized (no one controls them) and architecturally decentralized (no infrastructural central point of failure) but they are logically centralized (there is one commonly agreed state and the system behaves like a single computer)”. Vitalik Buterin, Ethereum Co-Founder, Bitcoin Magazine Co-Founder.
Hitters Xu, Nebulas Founder & CEO, AntShares (NEO) Founder
Hitter Xu describes decentralisation as being the soul of blockchain technology. He goes on to say that decentralisation is a super-set of non-trust mechanisms. It is an open source data storage and processing ability based on consensus (agreeance), e.g. consensus between nodes in Bitcoin. With true decentralisation ALL nodes are equal, and there is no privilege.
“This soul or a guiding ideology is decentralization, also called liberalism or Austrian economics. It is indeed exciting, for it has the potential to subvert the existing system and innovate. At the same time, it also encourages everyone to boldly explore new areas, use theories to guide practice and make breakthroughs, to lay a solid foundation for the rapid development and progress of blockchain”. Hitters Xu, Nebulas Founder & CEO, AntShares (NEO) Founder.
Meltem Demirors, CoinShares CSO
Meltem Demirors believes that the primary difference between centralisation and decentralisation is power and control. Decentralisation is the idea of there being no central entity controlling, commanding, or providing access between two parties. It is common knowledge that Bitcoin is designed to decentralise money. Now, according to Demirors, we are working towards decentralising our identities. Instead of governments managing our identities, we take ownership ourselves and control how we use our identity information. Finally, to keep a decentralised system running she says the software needs to be open source. The community needs to actively audit, review, and write the code to ensure the protocol functions the way it should.
what does "decentralized" mean? decentralized at the protocol layer, in terms of development or distribution of tokens? at the networking layer, that's distribution in terms of implementation of the protocol and full nodes v SPV nodes? at the application layer, TBD
— Meltem Demirors (@Melt_Dem) February 28, 2018
Jacob Kowalewski, Lisk Academy Founder
Jacob Kowalewski firmly believes that decentralisation is blockchain’s most revolutionary quality. Blockchain’s use of consensus protocols across a network of nodes enables incorruptible transaction recording and validation. Also, he describes other benefits a decentralised blockchain provides users such as lower fees and enhanced privacy and security.
“The decentralized nature of blockchain technology means that it doesn’t rely on a central point of control. A lack of a single authority makes the system fairer and considerably more secure”. Jacob Kowalewski, Lisk Academy Founder.
Ross Carter-Brown, BitPrime Founding Partner
BitPrime’s own Ross Carter-Brown views decentralisation in three different categories. If you are appraising a blockchain project or token then it is important to evaluate its liabilities, assets, and potential. Therefore, it is useful to assess decentralisation based on the following categories:
- Decentralisation of network architecture - how are transactions validated (e.g. PoW/PoS)? How many full nodes are there? How are those nodes distributed spatially?
- Decentralisation of governance - how big is the development team or community? How are decisions made, both in terms of strategy, and changes to the protocol?
- Decentralisation of ownership - are large portions of the tokens held by a small number of wallets or people? Who are the largest token holders? Are any of the large holdings locked in escrow or could they be dumped on the market at any time?
“When doing due diligence on a token or cryptocurrency you must assess decentralisation on three levels: network architecture, governance, and ownership”. Ross Carter-Brown, BitPrime Founding Partner.
Decentralisation is a powerful tool for removing control from a select few individuals or organisations and giving it back to the many. Through decentralisation, we can be confident in our transactions online, knowing that the records are immutable. No one can tamper with the data stored on a blockchain ledger without the action being noticed and rendered invalid.
Blockchain decentralisation provides numerous benefits to us of which this article outlines a mere few. These benefits include resistance to attacks and faults, and reliable record keeping without the need for a trusted third party.
Whether viewed as the soul of blockchain, or as its most revolutionary quality, industry experts all agree on one thing. Decentralisation is of the utmost importance to the blockchain.
Over to You
Is decentralisation important to you when it comes to cryptocurrencies and blockchain? Let us know your thoughts on the topic in the comments below.
Disclaimer: The above references an opinion and is for informational purposes only. It is not intended as personalised financial or investment advice. The opinions expressed by the author do not represent the opinion of BitPrime.
Last updated: 26/06/2018