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The meaning of decentralization

Vitalik Buterin
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  • Decentralization is the word most commonly used in cryptoeconomics spaces and viewed as vital to blockchains, but is poorly defined
  • There are three types of decentralization:
    • Architectural - how many physical computers a system is made of
    • Political - how many individuals or organizations control the computers the system is made of 
    • Logical - whether or not the interface and data structures of a system interact
  • Blockchains are politically and architecturally decentralized, but logically centralized

Reasons for decentralization:

  • Fault tolerance - systems are less likely to fail because they rely on separate components
    • Important to have multiple competing implementations
    • Ideally, proof of stake is used to move away from hardware centralization risk
  • Attack resistance - more expensive to attack because of less sensitive central points
    • Smaller amounts of power makes it harder to attack
    • Pushes strongly for proof of stake over proof of work
  • Collusion resistance - harder for participants in decentralized systems to collude to act in ways that benefit them at the expense of other participants
    • In the case of blockchain protocols, the mathematical and economic reasoning behind the safety of the consensus relies on the uncoordinated choice model
    • assumption that the game consists of many small actors that make decisions independently

How to create “good” decentralization

  • Build protocols that resist undesired coordination
  • Allow enough coordination for a protocol to evolve, but not enough to enable attacks
    • Make beneficial coordination easier and harmful coordination harder
  • Best solution may be to rely heavily on the one group that is guaranteed to be fairly decentralized: the protocol’s users
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