Routes to decentralization
Even though there are systems that existed before bitcoin or blockchain that can be classed as decentralized to a certain degree, such as BitTorrent or Gnutella file sharing, with the advent of the blockchain technology many initiatives are being taken in order leverage this new technology for decentralization. Usually, the bitcoin blockchain is the first choice for many as it has proven to be the most resilient and secure blockchain with a market cap of almost 12 billion dollars. An alternative approach is to use other blockchains, such as Ethereum, which is currently the tool of choice of many developers for building decentralized applications.
How to decentralize
A framework has been proposed by Arvind Narayanan and others that can be used to evaluate the decentralization requirements of a variety of things in the context of blockchain technology. The framework basically proposes four questions that, once answered, provide a clear idea as to how a system can be decentralized. These questions are listed as follows:
- What is being decentralized?
- What level of decentralization is required?
- What blockchain is used?
- What security mechanism is used?
The first question simply asks what system is being decentralized. This can be any system, for example an Identity system or trading. The next question can be answered by specifying the level of decentralization required by looking at the scale of decentralization discussed earlier. It can be full disintermediation or partial disintermediation. The third question is quite straightforward, where developers can make a choice as to which blockchain is suitable for a particular application. It can be bitcoin blockchain, Ethereum blockchain, or any other blockchain that is deemed fit for a specific application. Finally, a key question needs to be answered about the security mechanism as to how the security of a decentralized system can be guaranteed. It can be Atomicity, for example, whereby either the transaction executes in full or does not execute at all. In other words, it is all or nothing. This ensures the integrity of the system. Other mechanisms can include reputation, which allows varying degrees of trust in a system.
Examples
In this section, an example of the application of the afore mentioned framework is provided.
In the first example, a money transfer system is selected, which is required to be decentralized. In this case, the four questions mentioned earlier can be answered in order to evaluate the decentralization requirements. The answers are shown as follows:
- Answer 1: Money transfer system.
- Answer 2: Disintermediation.
- Answer 3: Bitcoin.
- Answer 4: Atomicity.
By answering these four questions, it can be shown how a payment system can be decentralized. Based on the preceding answers, it can be stated that the money transfer system can be decentralized by removing the intermediary and will be implemented on the Bitcoin blockchain with security guarantee provided via Atomicity.
Similarly, this framework can be used for any other system that needs to be evaluated for decentralization. By answering these four simple questions, it becomes quite clear as to what approach can be taken to decentralize the system.