Decentralization: Separating Fact from Fiction in a Hyped-up World

I often hear the word 'decentralization' used in a variety of ways, and included in a variety of lists.

The most recent time I read about it, was on Twitter, when someone was posting a list of decentralized 'apps' and social media... This made me wonder, why hive was not included, so of course I (and many others commented), but I did not see any response from the tweet author.

That tweet got me thinking ... do people really know what decentralization is? Do they understand the importance of it? Can they use the word right - at least do they know what platforms they use?

We need to know at least some basic definitions so that our choices are informed and rational.

If I was asked to put decentralization simply, I would respond "when the power is in the hands of many (usually the majority) and not in the hands of one or a few"

And now let me get into more depth.

How is decentralization defined?

The term "decentralization" embraces a variety of concepts which must be carefully analyzed [...]. Decentralization—the transfer of authority and responsibility for public functions from the central government to subordinate or quasi-independent government organizations and/or the private sector—is a complex multifaceted concept.

Different types of decentralization should be distinguished because they have different characteristics, policy implications, and conditions for success.₁

Where does the word decentralization come from and where was it first mentioned?

The word 'decentralization' combines the prefix 'de-' (which means 'away from'), and 'centralization', which is used to describe the authority in a central person or body.

The word 'centralization' was first used in English in the early 1800s₂, while the word 'decentralization' was first recorded in 1846, according to Merriam-Webster₃. It described the transfer of certain functions from a central government to regional authorities. The word 'décentralisation' "is attested by 1835 in German, in reference to France, but the word does not seem to appear in French before the earliest English dates" ₄

Now, let's discuss decentralization in regard to blockchain & digital currencies.

Decentralization (or the lack of it), has to do with the consensus algorithm that is used for the blockchain. Who takes decisions for the future of the blockchain? How is consensus achieved?

We will not go into too much technical information in this post, but you will be able to get an idea on how to understand the level of (de)centralization of a digital currency.

What about Bitcoin? Is it the first decentralized currency?

Even though the word decentralized is not mentioned, there are parts in the Bitcoin whitepaper that actually describe it.
For instance:
The paper states that Bitcoin is "a purely peer-to-peer version of electronic cash [that] would allow online payments to be sent directly from one party to another without going through a financial institution" and that it is "based on cryptographic proof instead of trust, allowing any two willing parties to transact directly with each other without the need for a trusted third party".₅

Bitcoin is considered to be the first decentralized cryptocurrency, designed to solve the problems faced by early forms of digital currency, such as double-spending, censorship, and centralization. Bitcoin also a consensus mechanism called proof-of-work, which requires miners to compete for the right to add new blocks to the blockchain by solving complex mathematical puzzles. This ensures that no one can control or manipulate the network.
*Again, there are a variety of issues that are being discussed in the community, arguing the decentralization of Bitcoin, Ethereum, and other currencies.
This post will not get in-depth but you can search online for keywords such as 51% attack

The most important consensus algorithms

Consensus algorithms are mechanisms that allow the nodes of a blockchain network to agree on the state and validity of the shared ledger, without relying on a central authority.

Some of the most common consensus algorithms are:

Proof of Work (PoW): This algorithm is used by Bitcoin and other cryptocurrencies. It requires the nodes to compete for the right to add new blocks to the chain by solving complex mathematical problems that require a lot of computational power and energy. This process ensures that the network is secure and resistant to attacks, as an attacker would need to control more than 50% of the network’s hash power (the total computing power of the nodes) to manipulate the ledger.
Proof of Stake (PoS): This is an alternative to PoW that aims to reduce the energy consumption and environmental impact of blockchain networks. It does not require nodes to solve complex puzzles, but rather to stake some of their coins as collateral to participate in the consensus process.
Delegated Proof of Stake (DPoS): This is a variation of PoS that introduces a voting system to elect a group of delegates or representatives that are responsible for creating new blocks and validating transactions. The delegates are chosen by the stakeholders of the network, who can vote for their preferred candidates according to their stake.

Feel free to read more here for a more detailed and analytic approach.

TL;DR

Too lazy to read this all?
In short, do not believe everything they tell you. Words such as 'decentralization' sound pretty cool, but often people use it without understanding it, or make their platform selection based on what is being said. Decentralized is a system ONLY when decisions regarding its operation and functions, can be made through a large group of people (or the majority of them). Bitcoin was the first truly decentralized cryptocurrency, however now it is being argued by various community members if the major cryptocurrencies are really decentralized or not.
The level of decentralization depends on the consensus algorithm used for the blockchain function, so it helps to have a good understanding of the most important ones and the differences between them.

I hope that the above make sense!

Please remember, as Professor Marinos Themistocleous mentioned today during an interview "Education is the only way to go forward". Do you agree?

http://www.ciesin.org/decentralization/English/General/history_fao.html
https://www.geeksforgeeks.org/consensus-algorithms-in-blockchain/

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