A Journey Into Decentralization
Hello there and welcome to the second post of the series Technological Foundations here at blockwhat?.
In this post we will dive into the fascinating aspect that lies at the heart of all of this — decentralization. We will explore the history behind it, it’s changing impact throughout time and how it is manifested in blockchain technology nowadays.
It’s going to be an intriguing ride, so let’s get going and jump right in!
This article is part two of our journey into the technological foundations of blockchain technology.
If you’re new here and want to understand what’s going on, just click here.
- The Tech Behind Blockchains
- A Journey Into Decentralization (This article)
- Hash(ing) Everywhere — A Primer On Hash Functions
- Public Key Encryption — A Comprehensive Guide
- Merkle Trees — Ensuring Integrity On Blockchains
- Finding Consensus 1/4: Byzantine Fault Tolerance
- Finding Consensus 2/4: Proof of Work
- Finding Consensus 3/4: Proof of Stake
- Finding Consensus 4/4: Alternative Consensus Mechanisms
- Network — Who’s Doing All This Stuff?
Centralization
We start our journey into the decentralization aspect by taking a look at it’s counterpart — centralization.
This story goes back a long, long time and has its roots in the advent of larger human cooperation and the move towards increasingly big settlements. As our ancestors started to live together in groups that exceeded the magical number of 150 people (this is know as Dunbar’s number), effective cooperation became only possible by establishing centralized structures and institutions. These centralized structures enabled the flourishing of many great civilizations and eventually laid the foundation of the modern world we call ours nowadays.
At the heart of all of this was an ingenious way to establish trust between all the different people who had to work and interact with each other — ledgers.
Ledgers serve as a tool to record and maintain information and thus form a societal memory. This societal memory enabled a highly effective cooperation among our fellow specimen and are the backbone of the world today as we know it.
Instead of the need to trust one another that we really are who we claim to be, we nowadays trust the government to provide a trusted source of identification (IDs, passports, driver’s licences, etc.). We trust the banks to ensure that nobody is simply adding some zeros to their bank accounts or that someone spends her money twice (this is also known as the double spend problem, we’ll cover this in a later article). The list of centralized institutions that we put our faith in to guarantee trust between each other, goes on and on…
In recent years we have come to see an evolution in the economic and digital realm that is rather paradoxical at the first sight though — the ever-growing tech behemoths of the likes like Facebook, Amazon or Google. Incubated in the early promise of the Internet, which entailed a decentralized, democratic and glorious future for us all, they’ve turned out to utilize the underlying decentralized nature of the network to establish monolithic all-encompassing centralized data gathering giants.
These services (and many others like them) offer their users an almost unbeatable convenience to use their platforms — by bundling the user interface, the underlying code and data into one easy to use service. Interestingly enough, many of the big names of the digital economy rely on one central infrastructure provider to help them deliver their services — Amazon Web Services (AWS).
While they offer an undebatable convenience, centralized nature of these services harbors some nasty downsides.
Controlling massive amounts of user data gives them a lot of power and they are prone to offer tasty goals for hackers who want access to the gold of our time — our digital data. An over reliance on AWS and consequently failures and downtimes in their global infrastructure take corresponding services down with them.
And this isn’t even taking into consideration the potentially horrendous effects that increasingly sophisticated algorithms will pose when they are fed more and more data about us and our habits.
This first chapter tried to give a brief introduction into centralization and it’s possible shortcomings — in the following section we’ll dive into decentralization.
Decentralization
As our world grew increasingly centralized, this tendency encompassed not only the political, but also the economic and informational spheres. Yet, in each of them we also had events and trends that heralded a somewhat decentralized take on them.
How so, you might ask?
Well, in the political (authoritative) dimension the trend towards centralization found its most extreme forms in the shape of the absolutist monarchies and modern day dictators. Yet, arguably democracy can be seen as a form of decentralizing power and decentralizing the decision process.
In the economic sphere we have witnessed the trend towards large multinational corporations and even monopolistic behemoths like Standard Oil. Still, we have seen many different kinds of decentralization also seeing the light of day in this area, think for example of insurances. By distributing the economic risks borne by each insured person, it helped to greatly alleviate potentially costly. Nevertheless, insurance companies are of course still huge and centralized institutions.
The informational sphere relates to the hegemony of knowledge and information. For the bigger part of human existence, institutional and societal knowledge was extremely centralized in the hands of some select scholars, the people who were literate enough to comprehend it and the ones who could afford to own a scripture or a book. This status quo began shattering when Gutenberg invented the printing press and thus enabled the efficient and low-cost manufacturing of books. It is mesmerizing to fathom the degree if decentralized access that we enjoy nowadays and that we take for granted.
As you can see, the phenomena of decentralized trends reaches a long time back. In order to properly understand and to classify the different types and degrees of decentralization, there are three important dimensions that we have to grasp and look at.
The first one is the architectural nature. This relates to physical makeup of the system, for example how many physical computers are actually part of the network.
Second is the political aspect, this dimension is analyzing the governance of the system, aka who controls the computers that make up the system.
And last but not least is the logical aspect, which looks at the way the interface and data structures behave and respond. A much cited question to clarify this aspect is “If cut in half, would both halves continue to fully operate as independent units?”.
The image below gives you a good overview over the three mentioned dimensions — if you want to deep dive into the respective fields I highly recommend you to read this insightful post by Vitalik Buterin.
When it comes to the reasons for a decentralized approach, there are three main ones that stick out — namely fault tolerance, attack resistance and collusion resistance.
We’ll explore each of these points briefly, starting with fault tolerance.
This point highlights the importance that a system with many different parts, of whom none taken by itself is essential to the functioning of the system, is tolerant to errors and faults of single parts. The concept resembles the redundancy aspect that we find in a lot of different settings, for example that we have two jet engines instead of one, that we have backup power generators etc.
On a fascinating side note, there is something that is often forgotten though in these cases — something known as common mode failure.
This concept elaborates that quite often the different parts of redundant systems are nevertheless produced or maintained by the same party or entity. For example, the software used by all the computers can have the same bug or that the hardware is being built by the same single company which could theoretically build backdoors into its products.
The second point mentioned above is attack resistance. This aspect refers to the fact that a system that doesn’t have a single point of failure or a single point of attack, is way more resilient and harder to successfully attack.
Collusion resistance results from the difficulty to behave in self benefitting ways, this is also known as the free rider problem and described in greater detail in this article about Prof. Emin Gün Sirer.
Now that we have explored the fascinating world of decentralization, we will look at the way this concept manifests itself in so called Distributed Ledger Technologies.
Distributed Ledger Technologies
“Distributed this, decentralized that…”
There is a lot of terminology being thrown around in the blockchain space, therefore it is indispensable to have a clear understanding of what the different names actually mean.
Decentralized systems are a special subset of distributed systems. In short, in a decentralized system all the work is done by the different parts of the system and the decisions are never made by a centralized and single entity — in contrast, a distributed system can work (process) data on many different computers but decisions can still be made in a centralized fashion.
These pursuit of creating and using decentralized technologies in order to enhance privacy goes back a long time and played an essential role in the activist group that centered around the legendary Cypherpunk mailing list.
“Privacy is necessary for an open society in the electronic age. Privacy is not secrecy. A private matter is something one doesn’t want the whole world to know, but a secret matter is something one doesn’t want anybody to know. Privacy is the power to selectively reveal oneself to the world.”
— Cypherpunk Manifesto, 1993
It turned out that decentralized applications such as file sharing (remember BitTorrent?) and messaging were doable to engineer and to develop — but currency was a really nut.
This changed, when Satoshi Nakamoto published the whitepaper on Bitcoin in late 2008 and kicked of a wave of excitement.
(You can read the captivating history that led up to Bitcoins creation right here.)
It took people a couple of years to fully grasp the groundbreaking potential that Bitcoin’s underlying technology offers — but ever since then we’re experiencing a fascinating quest to fathom the potential of blockchains.
What exactly is it that makes this new technological paradigm so powerful?
At its heart, Blockchains are a ledger of information — therefore honesty and accuracy of the recorded data is extremely important. These properties are achieved by using innovative consensus protocols that ensure a decentral validation and recording of data in a way that is incorruptible.
As there isn’t a central point of storage, but rather thousands of copies of the ledger stored on computers all around the world, the data is efficiently protected against loss or destruction. This decentralized nature also increased the resilience of the system, since attacking one point of storage would not result in the loss of data in the overall system.
Since there is also no central point of control, the whole system tends to be fairer and more secure that its centralized counterparts.
Interestingly enough blockchains also increase a users privacy. This might seem paradoxical at first, since the data is scattered across multiple devices which are controlled by various people — yet, complex cryptographic tools and the limited personal information that is required to participate, ensure a high level of privacy.
While the centralized behemoths like Google or Facebook offer easy and convenient services, they also bundle all the power over of the data of its users in one hand.
This is where blockchains have a real potential to enhance a user’s privacy — by separating interface (wallets for example), the code (in the form of decentralized applications) and data (a user’s inputs).
Users now have the power to decide who gets access to their data, they can get compensation for it and also move easily from one service to another.
A concept that is pushing the frontier of economic and societal phenomena, are so called Decentralized Autonomous Organizations.
Blockchainhub summarized this fascinating new possibility as follows:
“The idea of a decentralized organization takes the concept of traditional organizations and decentralizes it. Instead of a hierarchical structure managed by a set of humans interacting in person and controlling property via the legal system, a decentralized organization involves a set of people interacting with each other according to a protocol specified in code and enforced on the blockchain.
A Decentralized Organization (DO) may or may not make use of the legal system for some protection of its physical property, but even this such usage is secondary. For example, one can take the shareholder-owned corporation above, and transplant it entirely on the blockchain; a long-running blockchain-based contract maintains a record of each individual’s holdings of their shares, and on-blockchain voting would allow the shareholders to select the positions of the board of directors and the employees.
Smart property systems can also be integrated into the blockchain directly, potentially allowing DOs to control vehicles, safety deposit boxes and buildings.
DAOs are the holy grail of DOs: it is an entity that lives on the internet and exists autonomously, but also heavily relies on hiring individuals to perform certain tasks that the automaton itself cannot do.”
This concept an even be taken so far as to imagine autonomous driving cars that own themselves — absolutely mind blowing stuff.
If you’re reached this point I applaud you and have to humbly thank you for having taken the time to read all the way through this post.
I thoroughly hope that you walk away with a clearer understanding of the meaning, the importance and the practical application of decentralization.
As always, please feel free to let me know what you think about this piece or if there are any open questions that still linger in your mind!
All the best and yours truly
Till
PS: If you’re looking for helpful and great resources to learn more about blockchain’s paradigm shifting technological potential, check out these awesome resources.
