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What Does Decentralization Actually Mean?


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Decentralization is a key selling point of most public blockchain platforms. But what does decentralization mean, specifically? And how does a blockchain, or distributed ledger technology (DLT) as it is also known, provide decentralization to its users without compromising the privacy, security or reliability of blockchain transactions?

Defining Decentralization

In a general sense, decentralization means that no single entity has exclusive control over data or processes. This scares China and the European Central Bank to death and it is why they are anxious to slap restrictions on DLT.

By definition, blockchains provide a basic level of decentralization because transactions are recorded by all users on the blockchain network. Any changes to the transaction record must be confirmed by the vast majority of blockchain users in order to be recognized as legitimate.

If a single user or small group of users were to try to manipulate blockchain data in a way with which a majority of the network disagreed, their efforts would be thwarted by the rest of the network. This is one of the features that make blockchain technology so powerful.

It is also a feature that distinguishes blockchains in a crucial way from traditional databases, in which all records are stored in a central location. That location is usually controlled by a single party, who has the power to modify records without consulting anyone else. For privacy, this single party must be blindly trusted by everyone to protect the private information they store and not use it for gain without consent. Databases can and have been the single point of failure by which malicious actors attack, compromise, steal and profit off the private information they contain.

Decentralization + Privacy and Governance

Yet decentralization is complex and nuanced. Decentralized transaction records - a feature that all blockchains provide - do not necessarily mean that a blockchain is decentralized in other respects.

For example, on some blockchains, platform governance is largely centralized, even though transactions are decentralized. Bitcoin is probably the best example of such a blockchain. Bitcoin lacks a formal governance model, which essentially leaves Bitcoin developers with outsize influence over changes to the Bitcoin protocol and platform. While the developers don't have exclusive control, they enjoy more influence than users and miners. At the same time, miners do all the work for Bitcoin and can join forces to embargo any proposal that has a negative effect on their income.

In other cases, governance is decentralized to a certain extent, but not fully. For instance, on the Dash platform, masternodes hold voting rights. There are many masternodes, and in theory, anyone can create a masternode. But because doing so requires considerable resources, not all users are able to participate in governance. Dash governance is decentralized in the sense that it is not controlled by any single party, but it is also privileged because only a portion of the community can participate in governance.

It is also important to note that decentralization should not be conflated with privacy. It is possible for a blockchain to operate in a decentralized way but without guaranteeing the privacy of its users. Bitcoin also serves as an example in this case because, by default, Bitcoin transactions can be traced . A Bitcoin transaction that is decentralized is not also private, unless it is specifically designed to be private via add-ons to the Bitcoin platform.

Particl's Approach to Decentralization

Particl takes a more aggressive approach to decentralization that demonstrates how a platform can be fully decentralized while maintaining privacy and reliability at the same time.

This is no mean feat. Typically, decentralization comes at the expense of privacy and reliability, particularly on an ecommerce platform like Particl's. When you remove a central authority from a platform, there is no one who can address threats to privacy or intervene when a transaction dispute occurs. However, Particl implements several techniques that allow it to square this circle and provide complete decentralization without compromising other important features.

Particl is built on top of Bitcoin, which guarantees transaction decentralization. But Particl adds several other features that take decentralization several steps further. They include:

  • Self-governance model . Anyone who holds tokens on the Particl platform can propose changes to the platform and vote on proposals. Proposal and voting rights are directly equivalent to the amount of tokens that one holds. This approach ensures that no single user or group of users enjoys more governance power than others. In addition, users do not need to meet a minimum investment threshold in order to participate in governance.
  • MAD escrow . Particl uses the Mutually Assured Destruction (MAD) escrow technique to guarantee the reliability of transactions without compromising privacy. MAD escrow does not increase decentralization; escrow is a separate issue. However, it ensures that users can count on transactions to proceed as expected, without having to rely on a central third party to oversee them.
  • RingCT and Confidential Transactions . Particl also implements RingCT and Confidential Transactions to prevent transactions from being traced. This feature also adds privacy to the platform without requiring third-party oversight.
  • Private communication tools . In addition, Particl offers private communication tools like end-to-end encrypted chat for users. While these tools are optional, they make it easy for members of the blockchain network to discuss transactions or the platform without worrying about third-party interference.

Particl serves as an example of what a fully decentralized blockchain looks like while keeping privacy as its DNA. It goes above and beyond the basic decentralization provided by blockchains like Bitcoin and manages to protect privacy and transactions at the same time.

Disclaimer: Particl is a client of BTC Media, which owns Distributed.com .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.



This article appears in: Bitcoin , Blockchain



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