In our our last article We explain the differences between a distributed and decentralized system from a technical point of view. But when we talk about decentralization we can not do it so categorically because decentralization is defined by many elements, such as algorithms, architecture, logic or politics incorporated in each blockchain. The analysis of these characteristics are very useful to assess their level of decentralization.
How relevant are the consensus algorithms for decentralization?
Bitcoin is created as a decentralized system by design. Attempts to create earlier digital currencies largely failed to be based on centralized models, with a single point of failure (single point of failure). This deficiency allowed the system on which they were based to have critical vulnerabilities for it, either internally, as was the case Digicash of the famous cryptographer David Chaum, whether externally, as was the case with e-gold, closed by the FBI.
Open source cryptocurrencies, due to their decentralized design, require consensus algorithms that solve the problem of Byzantine generals, that is, the particular interests of the intervening actors must be aligned to achieve the common goal of keeping the network connected in the time -and cooperation with each other-, introducing information in the system without the need for prior confidence. In the case of Bitcoin, the consensus algorithm used is that of Proof of Work or Proof-of-Work (PoW).
However, other consensus algorithms have been used that attempt to facilitate decentralized governance of systems based on blockchain, as the Proof of Participation (Proof-of-Stake or PoS) wave tolerance to Byzantine rulings (byzantine fault tolerance or BFT).
What are the elements that make a network be considered decentralized?
Vitalik Buterin in a reference article of 2017 He described that a decentralized system must be at the architectural, logical and political level. The Architectural Decentralization occurs in a network P2P (peer-to-peer or Between peers in Spanish) with nodes distributed in several autonomous systems (autonomous systems) which are the main ways of internet. In architectural decentralization we have to ask ourselves questions about how many real computers (nodes) the system is composed or how many of those computers can tolerate the system that fall from the network at any time.
The logical decentralization it is due to the fact of being Open Source (open source in English) In addition to being transparent with teams of independent developers and different implementations of the protocol, although as José Manuel Arenillas points out, Satoshi himself in 2010 was still the opinion that multiple implementations would not be a good idea. In logical decentralization we have to ask ourselves: Are the interfaces and data structures of the system a single entity or are they a non-identifiable swarm? What would happen if we could cut the system in half, between providers and users? Will they continue to operate as independent units?
Logical centralization makes architectural and political decentralization difficult and although it is not impossible, they are more difficult to maintain than, for example, a system like BitTorrent.
And political decentralization, in which there is a separation of powers through incentives and game theory that prevents a group (developers, miners, investors, markets, users, ..) from changing the protocol unilaterally without the majority of those groups. In political decentralization we have to ask ourselves how many individuals or computers control the computers of which the system is composed.
This last part is the ideological one and marks perhaps one of the differences most important among what is the Blockchain and DLT world. Political decentralization is one of the most controversial points and it is often the case that different projects that sometimes compete with each other resort to the hackneyed argument of "this is not decentralized" to speak of "true decentralization" and delegitimize other technologies as a definitive argument. In some cases with reasoned arguments and in many others in a selfish way.
For all this thinking about calling a decentralized project makes little sense. The important thing is to value the decentralization in the different elements of the system and, if it complies with all, then we can speak of a decentralized or partially decentralized system.
What are the advantages of a decentralized system from a technical point of view?
From a technical point of view, a decentralized system must be resistant to failures (fault tolerance), resistant to attacks (attack resistance) and resistant to collision (collusion resistance).
The Fault resistance It means that decentralized systems continue to work even if there is a failure in one part of the network, because they rely on many separate components that are still operational.
The resistance to attacks it means that decentralized systems are more expensive to attack, destroy or manipulate because they do not have central points that can be attacked. An attack must be organized in proportion to the total capacity of the system. That's why we argue many times that bitcoin is like a virus that is very difficult to kill from a technological point of view, as long as there are enough connected nodes.
The resistance to collision it means that in decentralized systems it is much more difficult for participants to collide to benefit at the expense of other participants.
For a decentralized system to be resistant to all three levels (failures, attacks and collision) there must be a variety of clients and not all or most of the nodes run the same software, although there are also prestigious developers with different opinions. Jameson Loop, for example, defends that a single system concentrates all the energy and transforms it into a solution. In the end, the important thing is to avoid a collapse of the network if there is an error in the software or because the developers turn out to be corrupt or make a mistake. In a blockchain of proof-of-workIf 70% of the mining hardware is in the same country, we add a risk of confiscation by the authorities of the country if they deem it convenient. We also add risk if we have a company dominating the production of mining hardware and is bribed or coerced to implement elements that allow the control of its operation. On the other hand, in a system of proof-of-stake, we add risks if, for example, 70% of the tokens They are stored in a house of exchange.
It is therefore the sum of all the elements of the system that helps define if they are resistant.
Why is decentralization important for the world?
From an ideological point of view there is a belief – on the part of the firmest believers of technology blockchain– that decentralization offers a possible way to improve the world. Decentralization facilitates the creation of systems resistant to censorship and helps so that neither information – nor the decision on information – can be dominated by a few.
Decentralization makes a network resilient by eliminating the single points of failure that, when they exist, favor that one or more players can control a network, making it centralized.
Bitcoin allows maintaining resistance to censorship and the immutability of transactions, eliminating the need to have to rely on a central entity. With Bitcoin, trust is distributed among many entities, enabling a decentralized money managed also in a decentralized manner.
Have collaborated on this article: José Antonio Bravo, economist, founding member of AvalBit.org@AvalBit and co-administrator of Telegram forum of BlockchainEspana.com; Javier Domínguez Gómez, Node programmer and co-administrator of the Telegram forum of BlockchainEspana.com; Alex Preukschat he is the coordinating author of the book 'Blockchain: The Industrial Revolution of the Internet' Ediciones Gestión 2000 (Grupo Planeta) and the graphic novel'Bitcoin: the hunting of Satoshi Nakamoto'@BitcoinComic and coordinating node of BlockchainEspana.com@BlockchainES, AllianceBlockchain.org@AlianzaBlock Y SSIMeetup.org@SSIMeetup. With edition of Iñigo Molero @Imolman.