Frederik Bussler

Blockchain for Good

Blockchain is Not Trustless or Decentralized

If you ask the average person in the blockchain industry what the benefits of blockchain are, they'll probably mention trustlessness and decentralization.
Three modes of decentralization are described: Architectural, political, and logical.
Architecturally, the argument goes, you can ask two questions to determine if a network is decentralized:
  • How many underlying devices are powering the network?
  • Are they geographically spread or concentrated in one area?
However, if we look at big tech players like the FAANGs (Facebook, Apple, Amazon, Netflix, and Google), they have many, many servers that are highly distributed in order to service their billions of users.
Just take a look at Google Global Cache nodes, which store public static content:
It looks pretty well distributed to me. Of course, just like blockchain, you have a spectrum or levels of data handled at various locations, such as a full node or a light node. Blockchains like EOS are extremely centralized, having just 21 nodes. Further, many blockchain nodes, such as most EOS nodes, are hosted on servers like AWS, GCP, and Alibaba.
Also, every node in the world stores the same copy of the blockchain, and they hold the entire thing. When a new transaction is made, the changes are replicated across the entire network, updating every node. Blockchain is replicated, not decentralized.
The next argument is that blockchain is politically decentralized depending on your answers to these questions:
  • How many people/groups are involved in the decision making process?
  • How does the power re-partition looks like?
  • What kind of criteria is used to weight each participant influence?
  • Are they any recourse / appeal mechanisms built in the system?
However, a few statistics can lay the political decentralization argument to rest. For one, "97 percent of Bitcoin is held by 4 percent of investors." Further, Bitcoin is mined almost entirely by mining pools:
Also, the way cryptocurrencies are transacted is almost entirely through centralized exchanges. Finally, the core developers have significant control over the future of the network.
The final argument for blockchain's decentralization is that it's logically decentralized. For example, there's no CEO or board of Directors who get to control the network. There are no articles of incorporation, physical address, or bank accounts. While it's true that blockchain, as a technology and not a company, doesn't need these things, there are still stakeholders and people with power, like the core developers, mining pools, and "whale" investors with huge wallets.
Ultimately, blockchain is less centralized than traditional networks, but it's far from decentralized. And when we have to trust the core developers with the entire future of the technology, trust users and investors not to collude to manipulate applications, and trust mining pools to validate transactions, it's not exactly trustless.
P.S. If blockchain was trustless and decentralized, how much would it really matter? No layperson outside the blockchain bubble has ever heard of decentralization.
DApps are accessed through normal browsers like Google Chrome anyway, and the front-end can still be manipulated. Most people would never look at the smart contracts (let alone knowing what that means).
At the end of the day, you need a better reason to use blockchain than saying "we decentralize X."

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