If we could only use one word to describe the crypto industry, we would probably choose "decentralization." I want to discuss this concept in today's post.
Decentralization frees us from having to rely on a specific central entity. Communities organized around a network replace central authority. At the technological level, decentralization is achieved by executing transactions through servers controlled by different people. Decentralization provides essential advantages, such as being independent of authority and free. In addition, systems not dependent on a single entity do not have a single point of failure.
The servers of decentralized networks are called nodes. In decentralized networks, the system continues to work when one or more nodes are not working. In addition, security problems occurring in nodes do not affect the overall network. And decentralization protects against censorship.
In a way, decentralization requires sacrificing efficiency. Because we distribute a job that we can do on a single server to many servers, we try to reach an agreement between them. Decentralization complicates coordination and increases the capability requirements of nodes.
We usually think of decentralization for a single blockchain. However, the fact that a single blockchain dominates the entire crypto network is against the idea of decentralization. In this context, we can criticize the idea that the Bitcoin network can base all crypto functions because it is illogical and against the ideal of freedom.
In addition to Bitcoin maximalists, we can also discuss Ethereum maximalists. Ethereum, the network where smart contracts, DEFI and NFTs are created, seems more suitable for maximalism with its vast ecosystem and scaling solutions.
Blockchains specializing in different subjects working together while competing will enable the crypto industry to snowball. Therefore, it is necessary to add interoperability to the discussions about decentralization.
We don't know precisely how the human brain works. On the other hand, disciplines such as neurology, psychology, philosophy of mind, and artificial intelligence provide us with ideas about what is going on inside our minds.
The human brain consists of approximately 100 billion neuron cells organized in a network. Thousands of neurons die within a day, and new ones are born. Keeping the same information in many different cells makes the continuity of our cognitive functions possible.
Different brain regions assume different cognitive functions, and these regions constantly communicate. People who have part of their brain removed for medical reasons show how vital redundancy is for the brain. Different areas can take on the functions of others.
In his book "How To Create A Mind," Ray Kurzweil suggested that the human brain consists of about 100,000 pattern recognizers. Each "pattern recognizer" composed of thousands of neurons can be considered a node. We know that some pattern recognizers work in a hierarchical structure, and some are autonomous. The brain has undertaken dozens of vital functions that are not controlled by the conscious mind. Also, our conscious mind is a battleground of many different motives and motivations.
On the other hand, we know that at the DNA level, a lot of redundancy is used to protect the code against errors.
In summary, we can say that the human brain, which is the most advanced network we know, has both decentralized and hierarchical structures.
Although decentralization is a fundamental feature of the crypto world, it is also an ideal to be achieved. Because many blockchains that claim to be decentralized are under a person's or institution's control, such projects fail if the rulers lose their faith. Moreover, regulation in the U.S. forces crypto networks to be decentralized.
Hovie test defines what an investment contract is according to U.S.securities law. Investing in a particular company to earn a return is considered an investment contract. Investments with investment contracts in the U.S. falls under securities law. This situation means that crypto projects are subject to regulations.
Decentralization also prevents sanctions from being imposed on crypto networks if no single entity represents a decentralized network.
With the Proof of Work(PoW) consensus algorithm, Bitcoin and Ethereum still have thousands of nodes.
Nakamoto coefficient is a measure of decentralization created by Balaji Srinivasan using the Gini coefficient and the Lorenz curve. It refers to the minimum number of nodes required to disrupt the operation of a network. Bitcoin and Ethereum have the highest Nakamoto coefficient among all blockchains.
Networks operating with the Proof of Stake (POS) consensus mechanism usually have around a hundred nodes. Nodes participating in these networks stake the network's coins instead of solving cryptographic puzzles to earn rewards. Networks working with POS consume less energy and have higher processing capacity than PoW networks.
In delegated proof of stake (DPoS) networks such as Hive and EOS, 20-21 validators selected by coin holders approve transactions. This way, DPoS networks can reach high transaction throughput at a low cost.
When it comes to decentralization, the first thing that comes to mind is the distribution of coins and the number of nodes. For example, the ten people with the highest number of coins own what percentage of the coins. In addition, whether a particular person or institution is decisive in the network.
Yet other factors affect the operation of a blockchain ecosystem.
To what extent can a blockchain-dependent on one or more developers be considered decentralized?
Are there different wallet alternatives to access the blockchain?
Is the blockchain's data kept on a centralized or decentralized structure such as IPFS?
Can we buy and sell digital assets on multiple exchanges?
Could the frontends of the blockchain lead to censorship?
It is possible to extend the list of questions further. Projects for each decentralization layer are still being carried out in the crypto space.
Hive is one of the few crypto ecosystems that is truly decentralized. As no organization represents Hive, it does not have a face or a representative known to the public. The distribution of Hive coins does not allow a few people to have a say in the network. Therefore, decisions are taken by consensus.
Hive works with the DPoS consensus mechanism. Hive power holders choose "witness." Out of more than a hundred nodes, 20 of them produce new blocks by consensus. The number 20 may seem small, but it's essential to remember that many community members choose each "witness."
The Hive blockchain can be accessed through three separate wallets. Three different frontends are used for blogging. Besides centralized exchanges, Hive and HBD are traded in community-developed DEFI applications.
I think the most critical resource for Hive is the community's competent developers, entrepreneurs, and bloggers.
Blockchains initially depend on those who designed them; over time, they become more decentralized. It is possible to describe all blockchains as centralized in certain aspects. In decentralization, shades of gray prevail over black and white.
We need to be pragmatic about the ideal of decentralization in the crypto world. Of course, preference and orientation should be in that direction, but I believe we should not consider any concept or approach absolute.
Thank you for reading.
