Decentralisation In Blockchains - Let's Talk About It
These talks are about layer one only for web 3 applications to be built on top.
Blockchain solves an important requirement for decentralization, which is the ability to incentive "miners" or infrastructure providers to secure the network in a trustless & autonomous way. Someone somewhere needs to store your data on a server, and that server & operational cost to keep infrastructure up and running isn't free.
Without a way to properly incentivise open and collaborative distribution of the network's infrastructure, it becomes centralised.
The only ones who'd be willing to store your data for "free" would be because they would find a way to profit from your data. If very few stores your data, you rely on them not to censor or even delete your account.
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Incentivised, distributed technology encourages decentralisation to form.
Decentralisation is akin to a scarce, natural resource; this means it cannot be manufactured; it comes of its own. Therefore, one can only encourage the atmosphere in which decentralisation can grow, similar to creating the right ecosystem for a living organism to grow.
You can create the best technology possible that promotes decentralisation. Still, it only matters the community ethos and willingness to join that community voluntarily.
Communities are raw, spontaneous, free-willed, and naturally against being bought out or artificial circumstances. Therefore, the most talented developers, amazing artists, & overall independent people flock to authenticity.
Why is decentralisation so hard to manifest for coins?
To create an atmosphere in which decentralisation can form & sustain, it takes a benevolent founder or circumstance, IE an alien invasion-like scenario where the whole "society" bands together; therefore, everyone is encouraged to join forces to survive.
For the first circumstance to work, the founder must find a way to remain anonymous. Regardless of that figurehead's stake, having a figurehead provides a potential centralising force whereby the majority have a "obedience to authority" and blindly listen to the founder. No person is perfect, and any upgrades to the protocol thereafter should be on equal merit. Decentralisation is to relinquish all power as much as possible.
The founder(s) must not seek any credit or financial gain from their invention. This means you're asking an entity to build something that cost them time, energy, & money to then give it away for free without any strings attached. Moreover, the conditions in which the technology is given away must be such that the coin is not highly desirable at birth.
The coin distribution must be bottom-up, community first, which is the opposite of the business class and general investing culture practice.
Suppose the coin is highly desirable at birth; even if the founder is anonymous and relinquishes all power, venture capitalists will easily accumulate the supply, thus creating a centralising coin distribution.
At birth, coins are usually at their cheapest or near their cheapest in perceived value; however, as time has gone by, we have seen that to be increasingly the opposite. Coins at birth have started to come out at extremely high evaluations. Large venture funds are hungrily awaiting to buy up the supply, whereas smaller participants cannot compete. So, even if a benevolent entity were to arise and gift us with amazing technology for free, there would still be a need for the right circumstances that are outside anyone's control.
If decentralisation cannot be forced into reality, the next best option would be to join what decentralisation exists today in web 3.
Even centralised coin distributions with known founders with large premines can have a community that rallies around the benefit that technology brings. While centralised due to coin distribution, communities can "break away" due to the nature of open-source software; communities can easily "fork" and start anew.
Community forks are encouraged to manifest when a outside force attacks, aka "money attack," where the attacker gains enough resources to brute force rule the network or a hostile founder who retained power over the network via a premine decides to harm the network. This is rare because it's counterintuitive to want to destroy your own investment by attacking it; compound this with the need for a community that is strong & united enough to break away from centralising rule & sustain itself without any centralised source of funding. If the founder is liked and acting benevolently, the community under the founder is generally okay living in centralised conditions due to trust in the founder.
In the event of a community fork of open-source software, the participants in the attack on the network can have their coins excluded on the new blockchain, leaving, in theory, a balanced coin distribution whereby no one entity has a controlling stake.
Web 3 Needs
Since reward incentives are needed to encourage a foundation of decentralisation to occur, the most important aspect of any network is how well distributed the coin is.
Key aspects of a coin's "birth" are needed to ensure decentralisation is encouraged.
- Anonymous founder or better yet, no founder (community created)
- No premine or token sale of any kind.
- Fair & open access to all for a chance to earn the coin from start to finish of the coin's distribution.
- Coins need to be distributed widely across many countries and cultures.
The key part to note here is, you can't buy a community—quite the opposite. The coin should be seen as "valueless" for as long as possible; this ensures it's not gobbled up by opportunist venture capitalists early on. The coin should also have a clever distribution method, one that encourages distribution far & wide.
The best time to ever launch a crypto network is first or early on. Early crypto coins can circulate without much value or none, go relatively undetected for vast amounts of time, and create a network of early enthusiasts who like the technology over it being seen as some investment. Going undetected also allows the benefits of a strong community to form, any bugs can be fixed, and the governance mechanisms can mature without strong attacks from opposing forces.
Unfortunately, we have reached a time where even if one were to launch a coin in a "stealth" way, if it were a great project, it would quickly be discovered. Venture capitalists suck up the supply, or it would be easily squashed by red tape regulations, attacks & web 2 hostile takeover attempts.
The idea for a strong network effect is to have a way to get the coin in as many hands as possible, and those hands can't be there solely as an easy way to make money.
I believe the network effects that will carry web 3 have already been formed.
I do not believe a new coin will come around and generate a better community than what is already here today. And the communities already here are deeply embedded into the foundations they have helped shape over the years.
Web 3 is still a tiny tree, which will grow over time as we nurture it. Planting more trees does not make anyone tree grow quicker; it takes patience.
The best way to get a network effect is to join one that already exists today and help grow it.
This includes performance & decentralization, therefore requires a nice balance between the two.
The same principles of PoW vs. Stake-based networks apply, as in money attacks, are feasible on both. In PoW networks, the more hardware & energy you use on the network, the more control over the network you gain. The only difference in PoW vs. Stake-based systems is if a PoW network were ever taken over, the community would not be able to “fork out” the attackers in a meaningful way. The attackers can deploy the same attack on the community again. Since the community does not benefit from hardware sales outside the system, each successful attack leaves the community weaker than the last.
Whereby on Stake based systems, the underlining asset must be purchased in a money attack which then enriches the community of coin holders being attacked. The successful attack on a Stake-based network leaves the community stronger than the last. The PoW network (PoW competes vs. other PoW, therefore more likely to consolidate into one) that reaches critical mass would be the hardest to take over but cannot pivot as easily if ever corrupted. However, a stake-based system may, to some degree, be more venerable to a brute force money attack vs. a PoW network; it can more easily pivot and survive in the face of overwhelming sustained hostile takeover attempts of the network.
Therefore, I will focus primarily on web 3 governance models that can scale to handle applications to be built atop in this talk.
When a country or company is formed, you don't have 100,000 presidents that all have to agree before they could act. It's because having fewer people in charge is much more efficient. To achieve scalability here, we would need to have 100,000 people vote on one person they believe can do the job the best.
Therefore, it would be more efficient to have stakeholders vote on those they trust the most to secure the network. However, while having everyone vote on one person to run the network would be most efficient, it would also be the most vulnerable. So, the network should decide on at least a dozen or more nodes that reach "consensus" together.
For example, you can have 20 nodes of the network and 100's of backups ready if one of the 20 goes down, all voted on by potentially every stakeholder.
When talking about staked-based systems, node count becomes much less important, if not irrelevant to an extent. For example, if someone needs 51% + of all voting coins to take over the network, then both elected and non-elected systems have the same point of failure. Moreover, if both elected and non-elected systems have a balanced coin distribution in which no single entity has a controlling share, both are arguably close in censorship resistance.
The primary way to takeover a stake-based network is to have a controlling stake. There is virtually no circumstance where 20 elected nodes needing 2/3rds majority to pass new changes on the network could conspire to take over the network because they are voted in by many different stakeholders. There are many real-world examples of nodes with a smaller stake being elected in consensus by larger stakeholders. Therefore, assuming a correct balanced coin distribution, if any attempt by elected nodes to collude or be coerced into harming the network, both stakeholders and backup nodes (naturally incentivised into holding consensus to account) would instantly vote out corrupt nodes.
However, on the contrary, in a unelected system, many nodes can collude behind the scenes and cannot be voted off. This means harmful nodes can lurk in "shadows" and strike more unpredictably and can't be held to as much of an account. Compared to an elected node who must earn the reputation of being a good node to be voted in, which is hard to earn but easy to lose.
Contrary to unelected systems where nodes can pop up like whack a mole and are essentially anonymous to reputation. Elected systems are anonymous, meaning no ID is needed to run the network, yet reputation can be built using an anonymous persona. The ability to gain reputation yet remain anonymous means you can be held to account yet, don't become liable to the network via a known point of failure. While "doxed" nodes have an edge to gain a better reputation and become overall more trustworthy, it does come with more risk—freedom of choice.
Moreso, the ability to coordinate, organize and "move as one" is essentially impossible on unelected networks. Elected networks force strangers and friends to collaborate and work together much quicker, and speed is paramount in any hostile takeover event.
Avoid mob rule (1 person one vote); stake-based votes can be used. To avoid the rich, get richer, the stakeholders vote on network nodes instead of just sitting back and collecting the network fees themselves. While stakeholders can vote for themselves, they will require more outside votes to become consensus nodes; thus, they will need to show the other stakeholders that they are trustworthy and useful/consistent.
Elected node systems provide the foundation for scalability.
The most important layer to sustain decentralisation is layer zero. If layer zero is made of humans, we need to make sure communication is a top priority. Having "in-house" communication, where one can post permissionless any time of day without being censored, is especially important.
I believe any web 3 community needs three things built into the scalable technology.
- Account(s) Ownership - This includes all content, supporter, community list, and coin balance. All of this MUST be decentralized and secured.
- Decentralized Exchange (Dex) - This includes the ability to create liquidity pools and Dex "skins," which tie into an unbiased technology in which the dex skin can set the fees. 100% customizable dex gateways for each community are tied into a larger dex that is stake-based controlled.
- Social Layer - This includes the ability to create breakaway communities. The ability to communicate with all stakeholders in a censorship-resistant, permissionless way 24/7, 365, rain sleet, or hellstorm is critical to the survivability of any ecosystem.
You need to own your account, your exchange, and the ways you communicate. This means that the community is 100% self-sufficient and relies on no outside centralised technology. If your tech stack is missing any of the above, you've left yourself a major attack vector that will end up being a major liability in the future.
For instance, without having onchain communication, we would be vulnerable to being silenced, siloed, and overall fragmented. There is no way you can organize a emergency fork on an international 24/7 network if you're not completely organized. DPOS comprises stakeholders; therefore, every stakeholder needs access to what is being communicated by the witnesses and other stakeholders. Communication blackouts for even a few days could be catastrophic to a network under attack.
Moreover, you're unable to transfer value from one person to another in a trustless way; you severely handicap yourself. When crypto assets become more prominent, more widely accepted, there will be a day you won't need to sell your crypto. You could potentially live 100% inside of web 3, earning interest on your stable coins, the ability to spend on goods & services, all without relying on centralised payment processors.
To be continued...