Defining “Decentralization”

Decentralization has become synonymous with blockchain, but it is poorly defined at best and misleading at worst. “Distributed,” as used in the original bitcoin white paper, is far more effective in describing the simple underlying economic reality: not all of the transaction processing is done in the same place.1

Blockchains are, in fact, very centralized in their logic as there is only one commonly agreed upon state based off of a single protocol. This centralized logic allows the network to be maintained from anywhere in the world even if individual nodes (computers) maintaining the network go offline. As the founder of Ethereum, Vitalik Buterin, discusses blockchain protocols are only decentralized in their architecture (no single physical computer) and organizational structure (no single organization controlling the system).2

By being logically centralized and architecturally decentralized, the system provides tremendous benefits in the form of a more efficient and robust system. No single intermediary serves as a bottleneck to finishing tasks and operations can be executed uniformly anywhere according to a single protocol. Furthermore, blockchain-based systems are more resilient to attacks and faults as they do not require critical central intermediaries to execute tasks.

As blockchains are centralized in some ways (logically) and decentralized in others (architecturally and organizationally), referring to blockchains as decentralized can be misleading without further specification. If a better word is needed than “distributed” for the vernacular, perhaps “dis-intermediated” could more effectively describe the benefits arising from using blockchains to remove the bottlenecking effects of intermediaries.

1 Nakamoto, S. (n.d.). Bitcoin: A Peer-to-Peer Electronic Cash System [Scholarly project]. In Bitcoin.org. Retrieved June 10, 2018, from https://bitcoin.org/bitcoin.pdf

2 Buterin, V. (2017, February 06). The Meaning of Decentralization — Vitalik Buterin — Medium. Retrieved June 10, 2018, from https://medium.com/@VitalikButerin/the-meaning-of-decentralization-a0c92b76a274

Finance @ cLabs, shaping Celo

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