Blockchain and Decentralization go hand in hand, where the technology
Blockchain and Decentralization go hand in hand, where the technology of blockchain became well-known because it promised to implement the distribution of power. While the concept of decentralization has been there for a long time, its implementation was quite limited and mostly at a very small scale.
Blockchain brought decentralization to the masses through the concept of Distributed Ledger Technology on which “most” of the cryptocurrency is based on. Having said that not all blockchain based technology is completely decentralized, and the level of decentralization totally depends on its implementation.
Take Ripple for example, where it can be considered as a cryptocurrency but not a completely decentralized one. Ripple creators argue that the all-out decentralization hampers the scalability and speed of the network. Ripple has made its database decentralized to ensure transparency while the consensus is quite centralized as it provides the necessary scalability option to compete against the traditional giants like Visa and MasterCard.
So, not all blockchain are decentralized as the level of decentralization depends on its implementation. Let us look at the cryptocurrency space, which was solely responsible for bringing the decentralization concept to the masses.
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Not All Cryptocurrencies Are Decentralized Blockchains
Bitcoin, the pioneer of cryptocurrencies was envisioned as a decentralized economy where no single organization or individual had a majority stake in the system. The concept was invented after the economic crisis brought in by the aid of centralized banking systems, and people’s trust in these institutions was an all-time low.
Since Bitcoin is an open-source programme many other developers made use of the source code to create cryptocurrencies of their own, and after the 2017 price peak, there were at least thousand cryptocurrencies listed on the trade market. But, were all of them decentralized?
The answer is a Big No, the reality is only Bitcoin and Ethereum have enough decentralization that they are considered an independent entity, while the rest of them are considered security. The reason being after 2017 price rise of Bitcoin, the focus shifted from the Satoshi’s Vision for Bitcoin towards making quick money through ICO and then public listings.
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Is Decentralization All Good?
Decentralization refers to a system where the authoritarian power is distributed among the peers which ensure there is no single point of failure. But, is decentralization all good? well, not necessarily as it is quite evident from the Bitcoin blockchain.
Bitcoin promised a system of finance where the people are their own bank and one does not have to pay hefty sums to deposit, withdraw or hold one’s own money. However, decentralization also ensured that as time progressed and the number of people using the network increased the network was not able to scale accordingly to ensure the speed and scalability it promised.
As the Bitcoin network was struggling to scale with the increasing demand, the slow speed also affected the transaction fee, which was quite high when compared to other blockchains like Bitcoin Cash and Ripple.
So, yeah like any other technology or concept, decentralization has its fair share of good and bad, and its implementation also makes a huge difference. The reason for choosing an alternative has never been based on novelty or the intent behind it, it always has to be efficiency.
People did not start using Uber because it promised to use its fund for charity and social work, but mainly because it was convenient and cheaper than the available option.
Tesla didn’t become the leaders of its segment because of the promise of helping the environment, but only because they made a super efficient electric car which was far better than the combustive engine based vehicles which has been in the market for centuries.
So, the future is only decentralized if it promises to be more efficient and reliable than the other available options.
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Final Thoughts
Not all blockchains are decentralized as the level of decentralization depends on the implementation. This is the reason among thousands of cryptocurrencies only Bitcoin and Ethereum are considered to be decentralized enough to not be labeled as security.
However, decentralization does not outright guarantee success or transparency unless its implementation is right.
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