What Does Decentralisation Really Mean?
One of the key tenets of blockchain technology is decentralisation. Along with privacy and immutability, decentralisation is a core principle that those developing the technology are at pains to preserve and build into every blockchain iteration going forward — indeed, many would argue that a centralised blockchain is not a blockchain at all.
Decentralised networks existed before blockchain. Take torrenting sites like BitTorrent as an example. A network of computers democratically sharing files (illegally, in many cases) allows anyone to download pretty much anything from a peer without the need for any interference from a central party. Torrenting sites have been aggressively targeted by governments because they are fertile grounds for illegal sharing, though developers will often use them to distribute their work to the user.
Blockchain is quite different. It is not a file-sharing platform. Rather, it is a (usually) public store of data spread across multiple nodes as opposed to being stored in one central database. Decentralisation in the context of blockchain means that no one authority holds the data — every single node in the system holds a concurrent log of the data and no single party or group can alter the data without consensus. By its very nature, a decentralised blockchain is democratic in the sense that everyone has access to the information on it, and everyone’s log of that data is updated simultaneously at regular intervals. To get a clearer picture of exactly what decentralisation means, though, you have to examine what it makes possible.
Increased Security
One of the primary advantages of blockchain’s decentralised structure is vastly improved security. Using centralised databases, there is one point of attack for hackers looking to gain access to user data. It’s a dangerous system, particularly for those that collect sensitive user data like bank details or personal information, and just about every major technology company has been subject to a serious breach in the last decade. These breaches have severely damaged user confidence in companies’ ability to safeguard the data they share, with sweeping GDPR legislation the logical result.
Blockchain provides a potential remedy. Consensus protocols, used across a network of nodes, means the data is stored in a manner which is resistant to corruption. Every node holds a copy of the data. If one were to tamper with the data to remove a transaction, for example, it would be at odds with every other node that held a record of that transaction. Even if multiple nodes were in collusion, the number of honest nodes should be sufficient to drown out any bad actors. Of course, for individuals protecting their personal digital assets, the problem of having information to protect is still there — it just takes the form of a private key rather than a pin code. In fact, the multi-stage authentication used to make a credit card purchase — CVC code, expiration date, etc.
On a grand scale, though, the privacy measures in place to anonymise data stored on the blockchain mean data breaches on the scale of those suffered by the likes of Facebook and Marriott would be next to impossible. It is only when companies harvest swathes of user data and store it with inadequate security measures in place that such serious attacks can happen.
No Central Authority
Security is not the only advantage to the lack of a central authority. Decentralisation also allows for direct, peer-to-peer transactions that do not require a third party, often a bank, to complete. When the third party is removed, so are the transaction fees they charge. Yes, most major blockchains and coin exchanges come with transaction fees of their own, but these are primarily tied into the proof-of-work mechanic. Fees are not paid to the network, they are paid to incentivise miners to include transactions in blocks. As the technology develops and alternatives to proof-of-work are explored, fees could come down or disappear entirely.
Having no central authority also means greater transparency. There are all sorts of arguments to be made about the degree to which transactions should be anonymised and encrypted on the blockchain, but having publicly available records of ownership and transaction history has benefits. Take government issues as an example — citizenship or property rights could be enshrined on the blockchain and made enforceable by the use of smart contracts. Immutable, public information is the bane of corruption.
Tokenisation
Decentralisation also allows for the tokenisation and frictionless trading of just about anything. In another one of our posts on the applications of tokenisation, we explored the use-cases for tokenisation and found them to be wildly varied. When everyone has a log of where any token is at any given time, trading those tokens between parties becomes extremely straightforward and requires no third party or central authority to execute. The parties involved simply have to agree that the transaction is genuine.
The possibilities for tokenisation are vast, but they only function if there is no central authority controlling the tokens. When displayed on a public, decentralised ledger, tokens cannot be destroyed, hacked into, stolen or duplicated, problems that are all very real when held in a central database.
At Primalbase, we use blockchain because it provides a ready-to-use infrastructure to certify the ownership, integrity and authenticity of a membership token. This leads to a secure, flexible membership model. Additionally, the inherently simplified membership transfer process allows token holders to lease out their tokens and earn money.
We are also home to a range of amazing blockchain projects working to create real-world decentralised solutions. Stop by and meet some for yourself!
