Decentralization Is The Core Blockchain Value Proposition

2021-03-06 06:18:08

Author: Carter Woetzel


Originally published at: https://carter-woetzel.medium.com/decentralization-is-the-core-value-proposition-9f498df594da


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When we examine any technology, there are inevitable trade-offs for the features and use cases that are enabled by said innovation. Blockchain in particular suffers from the inescapable paradigm of the scalability problem. If you improve security and decentralization of a network, inevitably blockchain transaction output is slowed down — limiting the scalability of certain applications. If a blockchain network is highly secure with excellent transaction output, the network is not decentralized enough as a result.


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Some blockchain attributes are independent of security, decentralization, and scalability — most of which are compromised when a network is not decentralized enough. Those attributes are corruption resistance, immutability, auditability, and permissionless participation. As I contemplate many of the side effects of a blockchain, I can’t help but believe that decentralization is the key component of blockchain, even more so than security and scalability. If decentralization as an attribute is ever put into question, all other attributes of a blockchain become less important because the blockchain network becomes easier to compromise with less actors controlling governance and the ledger itself. Ultimately, more power is concentrated into fewer hands.

We have seen blockchain projects such as in the COSMOS ecosystem have only 100 nodes at any given moment to sustain the network. In Ethereum and Bitcoin there are 1000s. Blockchains that are built within the COSMOS ecosystem have higher transaction output, with almost 200 tps versus slower blockchains such as Bitcoin that only have 7 tps.

But at what cost? Larger and more complex smart contracts can be executed in the COSMOS ecosystem for cheaper, at the cost of less decentralization. While many of the validators in these ecosystems are reputable characters, the whole point of blockchain is to introduce an element of “Trustless trust” because anyone can be a validator with the right hardware — thus securing the network. It would appear that enterprise demand will increasingly apply pressure on publicly visible blockchain protocols to have a smaller pool of validators. And you can’t blame these actors; titans of industry such as Binance thrive on having essentially backdoor control over a variety of cryptocurrencies in a not so subtle manner (see the Steem vs Tron governance scandal).

Without decentralization of power, the immutability of a blockchain is under threat. And while a network may be permissionless to use, I find myself hesitant about blockchain networks that are not permissionless to support. Anyone should be able to become a validator, and a static cap on the # of validators seems contra to the ethos of blockchain communities.

Why should the actors have to be known and supported by a larger community to be a validator? Shouldn’t we place privacy and permissionless participation at the forefront of a movement that prides itself on decentralized participation?

I can understand the worry about illegal or immoral transactions, but the facilitator of those transactions are merely arbiters of an open protocol by which participants choose to partake in. Why should they be limited? The only possible answer is the nefarious incentive of concentrating power into the hands of fewer players, using scalability as justification.

I’d imagine we will see more of this play out. Never forget that the value of cryptocurrency is contingent upon how much the attributes enabled by blockchain are valued by those who adopt the currency. Thus, networks that abandon these fundamental values in favor of higher speeds will in my humble opinion face the inevitability of a lower price valuation. It remains to be seen if these players (and the larger community) will act in this valuation model once blockchain scales into larger pools of participants.

We shall see.


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