Evaluating Cryptonetwork Decentralization
A framework for evaluating cryptonetwork decentralization
Last week we saw why permissionless blockchains with open and inclusive properties will win and briefly looked at the driver of these properties, which is decentralization. This week we’ll define decentralization and propose a simple framework for evaluating cryptonetworks under this lens.
“Decentralization” defined
According to Wikipedia “decentralization is the process by which the activities of an organization, particularly those regarding planning and decision-making, are distributed or delegated away from a central, authoritative location or group.”
The framework
In the context of blockchains, there are three verticals along which decentralization takes place:
- Infrastructure: the distribution of hardware and other physical resources (required for inclusiveness);
- Software: open source code and data (required for openness);
- People: the division of governance power (required for inclusiveness).
According to this framework, the Web 2.0 is a two-legged stool composed of (1) distribution of physical resources and (2) open source software; although both are necessary they’re insufficient for a truly permissionless ecosystem.
With the advent of the Web 3.0 enabled by crypto-protocols, there’s finally a third leg that provides new decision making structures for rebalancing power. It’s the combination of these three verticals, decentralization of infrastructure, software, and governance, that’ll ensure the new digital economies remain not just open but also inclusive.
Now that we have a simple way to evaluate cryptonetworks, we’ll look next at how this applies to some of the major projects and how they compare to each other.
From around the web
The Web 3.0 Stack (Multicoin Capital blog) — Comprehensive framework for evaluating the new tech stack afforded by blockchains.
So you think you want to be a core developer? (Medium) — Post on what’s it like to be a Ethereum core developer. The TLDR: it’s not so glamorous but fascinating for those interested in computing fundamentals.
Demystifying “Snowflake to Avalanche” (Medium) — Clear and concise summary of the paper “Snowflake to Avalanche: A Novel Metastable Consensus Protocol Family for Cryptocurrencies. Avalanche is a “breakthrough” consensus protocol recently proposed by Cornell professor Emin Gün Sirer.
$13.5 Million Hack Ignites Fresh Debate Over Crypto Project Bancor (Coindesk) — Turns out Bancor, a “decentralized” exchange and market maker for smaller tokens, isn’t so decentralized. Lessons learnt in this post.
Augur, a decentralized prediction market protocol, launched.
How a Startup is Using the Blockchain to Protect Your Privacy (Wired) — New project called Oasis Labs with an impressive team and $45m in pre-sale financing announced they’re building a “privacy-first, high-performance cloud computing platform on blockchain.”
Introducing The Graph (Medium) — The Graph is a “decentralized query protocol for getting data off blockchains and storage networks.” It aims to make it easy for developers to find and use organized data.
DIRT Protocol raises $3M from General Catalyst, Greylock, Lightspeed, and Pantera to build a Wikipedia for structured data (Medium) — New protocol for decentralized information curation. Their mission is “to organize the world’s information and to make it freely accessible.” Sounds familiar…
Smiley corner 😄
Weekly newsletter published internally at Google. The views expressed are my own and do not necessarily represent the views of my employer.
