Decentralized dreams and waking hours

The ICO boom in 2017-2018, by the end of 2020-2021, the blockchain industry will recover again, decentralization is a benefit talked about by many blockchain projects. In the context of Internet giants controlling the Internet, the need for decentralization is growing. Recalling that a white paper in 2018 can raise a lot of capital, the results are mostly exaggerated. In the name of decentralization, many teams practice centralized services, but from design to operation, they do not fully meet the characteristics of decentralization and solve their worries.

This article will judge the decentralization characteristics and risks of the project from various aspects step by step. If you have a certain understanding of the content and feel boring, you can just read the bold/skip. I hope that readers will review the gap between the project's promotional language and the truth after reading.

consensus mechanism

To talk about decentralization, the first thing to talk about is how the existence of the network operates. Of course, the most people know about Bitcoin and the current Ethereum. Everyone can connect and become a node, that is, everyone can be the center. Rely on the same consensus mechanism to verify and verify transactions. Decentralized storage ensures that the network continues to function even if a majority of nodes go offline. POW (Proof of Work) (Proof of Work) is the consensus mechanism that is most considered to meet the decentralization characteristics. Mining pools and machines specially created for mining are born for POW to compete for the right to produce blocks and interests.

POS (Proof of Stake) (Proof of Stake) eliminates the computing power ratio of running nodes, but uses equity to determine the ability to become a node. Competition has changed from node computing power to token wealth. All token holders can set up nodes. However, even if an account with multiple tokens only establishes one node, it can still control the network’s block production rights and Benefit.

Bonded POS (Bonded Proof of Stake) is one of the branches of POS. It has the characteristics of POS, but it is open to all token holders for binding delegation. Determine block rights and interests. In disguise, it is like voting at the shareholders meeting, voting for the most prestigious node to maintain the network operation. Also, because the token holder binds the token to the validator, once the validator machine is insecure (intimidated by unfavorable actions such as double-spending) or goes offline, the delegator will also be punished by token reduction. Delegators need to clearly due diligence validators and continually verify their performance.

Subsection: When the community has different opinions on major events, it often leads to a hard fork, and the block information from the disputed time point is split into two books that are no longer the same, which is decentralization. How the community responds to extreme ways of disagreement. Examples are Steem split into Hive, ETH split into ETC.

Account ownership

Next comes the important element of decentralization - account ownership . Another feature of the decentralized network is that anyone can participate in the network to open an account without any central organization. Also because there is no central organization to manage, the blockchain community is more concerned about the hacking of centralized services and voting on behalf of users (Binance Exchange once voted on behalf of users in the Steem / Hive dispute) as "if you don't have the private key, you are not." your coins" (Not your keys, not your coins) response.

Anyone who owns the private key can be regarded as the account owner. Once the private key is leaked, it is equivalent to giving up the independent access right of the account. Because of this, any blockchain service has the risk of centralization as long as the private key is not in the hands of the user, and the visible assets are hosted by the service provider. Because the user does not have a private key, the account cannot be directly operated on the blockchain except through the service provider. Users will suffer losses once they are hacked, their servers are damaged, they are banned by government agencies, or they go bankrupt. Simple examples are accounts that do not log in with private keys, mnemonics, or hardware wallets, such as centralized exchanges, tipping robots, and web plugins.

Even if the service provides custody on behalf of the user for the convenience of the user experience, the accounts in the escrow account should properly reflect the user's operation, so that the user can view the details such as the monthly payment date and the number of tokens. Let the user download the private key. Note that when the service claims to be registering/pre-registering certain rights on your behalf, you should also pay attention to whether you directly own the private key. For the registration of the escrow account, you cannot prove full ownership, especially when the proof is engraved on the short-term chain, the effect is more doubtful. This will be another article about the history and sustainability of different blockchain chains.

Service decentralization

The decentralization of services is important because since decentralization is widely claimed, it is necessary to consider how the service/value in it will continue once the operator disappears. A service that meets this requirement requires at least code transparency so that anyone can rebuild the service.

Take Uniswap (a decentralized exchange on the Ethereum chain) as an example that many people know. User assets are interacted/stored through smart contracts on the chain. Self-built server operation. This example is completely decentralized. Be your own bank, you can deposit tokens at any time without the permission of a third party.

Taking a step back is the important logic of exposing the code so that users have a way to see if the code is operating as it should. An example is the disclosure of smart contract content. This is the way many blockchain services take. "Don't Trust, Verify" (Code Is Law).

The most centralized examples are centralized exchanges, some coin storage and interest collection services, and monthly payments are distributed through user interaction. Basically, they are hosted in their ledgers, and the operation is opaque, which should be regarded as the use of blockchain. services, not decentralized services.

Subsection: Similar to the blockchain hard fork, code transparency also provides the possibility to provide the same service if the community disagrees with how the service operates and improves.

Democracy and Decentralization

People often associate democracy with decentralization, but community governance is not necessarily related to decentralization. As the above cited example Uniswap, there was no community governance token when it first came out, but it is technically completely decentralized. A negative example is that many tokens with community governance functions do not have decentralization functions. There may be some attributes that can be voted publicly, but core affairs will not be governed by the community.

DAO is another buzz word (fashionable term) that is often cited to claim decentralization, detoxifying it for another article.

Epilogue

Decentralization is a dream, and it has become even more important since the Internet group was occupied by giants, and it has recently taken action to suppress freedom. Because of this, how to judge decentralization is more important, and it is true that there are not many completely decentralized services on the market, but one should fully understand the reality of decentralization, otherwise it is easy to incur losses. To paraphrase an Internet phrase: "ideas are plump, reality is very skinny", the scary thing is that skinny reality will continue to be packaged with ideals.