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Blockchain decentralization

Blockchain decentralization

State of a blockchain such that it doesn't have a central infrastructural point and no one single entity has control of it.

Blockchain decentralization is the state of a blockchain such that it doesn't have a central infrastructural point and no one single entity has control of it. This means that control is handled and managed by a network of independent computers located around the world. Because the structure is not centralized, there isn't a single point of failure, i.e. if one part fails, the other points would continue to function.

Benefits of Decentralization

A decentralized blockchain has features that a centralized blockchain or another type of centralized system doesn't have.

  • Robustness and Security - A network with multiple independent nodes in different locations is more robust and resistant to failures than a centralized network. If there are 100 nodes in a decentralized blockchain network and 10 of them suddenly fail, the network will still function fully with the remaining 90 nodes.
  • Censorship Resistance - A network which can't be governed or otherwise controlled by any single entity can't be arbitrarily censored by people in power. Anybody who has a cryptocurrency wallet for a decentralized cryptocurrency will be able to use said cryptocurrency regardless of other factors such as race, gender, location, political views, financial history (e.g. credit score), criminal history, etc.
  • Permisionless - Anybody is able to participate in a decentralized network without needing to get permission from anybody else. A decentralized blockchain is one in which anybody can participate in mining it given that they have the proper equipment.
Disadvantages of Decentralization

Achieving decentralization - particularly byzantine fault tolerance and resistance to sybil attacks - comes at a cost.

  • Slow speeds - Decentralized blockchains are generally much slower than centralized payment rails such as Visa and PayPal. This is because transaction data must be stored and propagated throughout the entire blockchain network, which requires adequate hardware storage space and internet bandwidth speeds. The more data is being processed in a given time period, the higher the hardware and bandwidth requirements are for all of the nodes who participate in consensus (i.e. validating transactions). If these requirements become too high, only a few or even one entity will be able to participate in consensus, at which point everybody who is using the blockchain needs to trust those few entities to be honest. That defeats the purpose of decentralization. This problem is referred to as the blockchain scalability problem.
  • High cost to operate - depending on the consensus or sybil resistance mechanism a blockchain uses, operating the network can also be extremely costly. For example, proof-of-work blockchains require that all miners perform excess computation as part of the incentive structure that makes it rational for miners to be honest in order to be profitable. Alternatives such as proof-of-stake have been proposed that don't require wasteful computation.


Further Resources


Decentralization in bitcoin and ethereum

Adem Efe Gencer, Soumya Basu, Ittay Eyal, Robbert van Renesse, and Emin Gün Sirer

Decentralization in Bitcoin and Ethereum Networks

Adem Efe Gencer, Soumya Basu, Ittay Eyal, Robbert van Renesse, and Emin Gün Sirer

Academic paper

Quantifying decentralization — we must be able to measure blockchain decentralization before we can improve it

Balaji Srinivasan and Leland Lee

The meaning of decentralization — but what does that actually mean? nuances, depth

Vitalik Buterin

Why decentralization matters — from eras of the internet to cryptonetworks

Chris Dixon

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