What Does It Mean to Be “Decentralized”?
Decentralized. We use that word all of the time in the crypto-sphere. Decentralized finance. Decentralized autonomous organization. Decentralized ledger technology. We use it all the time. But what does it mean?
A beginning is the time for taking the most delicate care that the balances are correct. That is precisely what decentralization is — a balance. A balance between powers, between influence, between the holders of information, and how that information is utilized and deployed.
Decentralization is about information. It is about balancing out the asymmetries inherent in those who are trying to sell you something and those that are being sold to. Decentralization is also about power — after all, knowledge is power — and when power is concentrated into too few hands, abuse not only becomes possible, it becomes likely.
Where, then, are the key fulcrums to focus on when talking about decentralization and blockchain technology.
Table Stakes
There are two fulcrums of decentralization that are table stakes to be considered a blockchain project. First — is that of recording the information itself. Satoshi provided the framework we use to decentralize who has the power to add or subtract from our joint immutable ledger. The second fulcrum has several flavors — canonicity. Who has the power to determine which record is the correct one? Satoshi gave us an initial flavor, but then King and Nadal also helped codify this fulcrum around how we find consensus. Proof-of-work and proof-of-stake are, obviously, not the only flavors. There is also proof-of-authority, proof-of-elapsed-time, proof-of-burn and many more.
The point is — decentralizing the ledger itself and decentralizing the METHOD of consensus are now table stakes. What is less clear is how important decentralization of validating power is. After all, some say that 65% of the hashing power on bitcoin is controlled by a single entity or within a single polity. Is that decentralized? Some proof-of-stake chains allow their centralized foundation to yield over 22% of the validating power on their blockchain. Is that decentralized? What about chains that have only a very limited number of block producers? Or — even — what about chains that run all of the validators themselves in the name of members of their communities?
This is about balance. In the early days of every decentralized project, there is a gilding of centralization to help bootstrap the network. However, for every project that professes running decentralized ledgers, DAOs or defi projects — having a sufficiency of diversity amongst the validators is vital. No single power block should be able to turn the project on or off.
Well Begun is Half Done
Blockchains are more than simple protocols, though. Some have compared crypto-networks to cities. In this way, decentralization becomes important not only in the governance layer (like we see in DAOs), but it is also important in the financial layer, in the transportation layer, in the layer that helps the project decide who and what it is.
Some crypto-networks wave away built in assumptions that lead to centralization. Proof-of-stake networks have a tendency toward plutocracy where the rich get richer and those without have trouble entering the marketplace. Others will hoard financial resources to deploy them only to the very few in some misguided attempt to preserve the elite status of their projects. For yet others, the path to power starts by gating access on or off the crypto-train.
Unconstrained PoS systems, foundations sitting on ICO hoards, exchanges gating the on-and-off ramps of the crypto-sphere — these are all mechanisms that can lead to centralization. Even if we start with the best of intentions, how can we ensure that our immutable ledgers stay immutable? That our uncensored databases remain intact? That our community efforts, our collective brilliance and the shear work that we have all put into these open-source systems are not hi-jacked by the clever, unscrupulous few?
Decentralization must reach deeper than the surface layers.
Miles to Go Before We Sleep
It is not simply about the networking layer or the consensus layer. The validation pool must reach beyond the lucky oligarchs. Decentralization demands trustless ways of getting into the network and getting out of the network. Bridges to other communities. Roads out of the city.
Internal to the network, tools must exist where information, power, and influence is shared and distributed. There must be mechanisms that prevent any single bad actor from standing in the way of progress and where the needs of a minority are not run roughshod over in the pursuit of market cap rankings.
Finally, there is an uncomfortable level of truth in the cynical “Golden Rule”. “He who has the gold, makes the rule.” The blockchain space has revolutionized how great ideas find funding. ICOs, IEOs, DAOs are all mechanisms whereby a large community can put their two cents into changing the world — and their combined widow’s mites create treasuries even Midas would envy. But the power over those treasuries is power over the project. In order to truly have decentralization, the funds themselves must be decentralized. Yes, this may weaken the single-minded efficacy of one all powerful foundation — but thus is the spirit of the blockchain: it doesn’t matter how fast you go, if we don’t go together.
What Does It Mean?
So. What does it mean to be decentralized? It is a balance. It is a spectrum. Power, information, authority is shared amongst the many. Beyond the network, beyond the consensus, truly decentralized systems will have trustless bridges, multi-sig contracts, DAOs funded and turned over to the communities. There will be great forums for discussion, debate and mechanisms for joint action. The beauty will be, not that we get our own way all of the time, but that we all move in the same direction towards the same goals.
It is a beautiful future. Join us as we build it in harmony.
About Harmony
Harmony is a sharding protocol with a trustless Ethereum bridge. Harmony developers can use Ethereum tooling such as Solidity and Ether.js. Users can also seamlessly swap Harmony and Ethereum assets. Harmony is able to achieve 2-second finality for fast transactions and is able to support 1000 delegating stakers for secure shards. Similar to layer 2 protocols, Harmony is now fully interoperable with the Ethereum ecosystem.
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