Introduction
Decentralization is considered to be one of the most important advantages of cryptocurrencies. But what is decentralization? and why is it that important? I am researching this subject to have a better understanding of it because I want to determine how decentralized are the crypto projects that I am interested in, starting with steem.
In my previous post, I talked about centralization: how it started, and why we need it. The gist of it was that we needed central entities to provide for the common needs of the society. We made them centralized because that makes them more efficient and effective.
I left you with this question: if central governments and organizations are playing such an important role, then why do we want to get rid of centralization? In other words, why do we need decentralization?
This is the subject of this post: the disadvantages of centralization:
1- Corruption
The worst disadvantage of centralization is corruption. Corruption is "a form of dishonest or unethical conduct by a person entrusted with a position of authority, often to acquire personal benefit."
When we give a substantial amount of power over society to a single man or organization, they tend to get corrupted. The more the power, the more the corruption.
Unfortunately, The world is full of corruption. Transparency International is the global civil society organization leading the fight against corruption. In its latest report "highlights that the majority of countries are making little or no progress in ending corruption". The following image shows the severity of the problem:
How Does Decentralization Solve this?
Decentralization can be defined as:
the process of distributing or dispersing functions, powers, people or things away from a central location or authority.
So, decentralization does not mean we cancel those services and functions that are done by centralized entities. Instead, decentralization means that we distribute those function (and the power that comes with them) to many entities. By distributing power, the amount of power in the hand of a single person/entity is dramatically reduced, which leads to reduced corruption.
2- Suppression OF Freedom
Although this can be considered as a form of corruption, It is so important that I had to make it a separate point. Centralized systems have a much higher tendance towards suppression of freedoms of all kinds: freedom of speech, political freedom, and financial freedom.
Source
In contrast, in a decentralized system, no one can suppress freedoms. Everyone controls his/her own choices.
3- Single Point of Failure
In a society that depends on centralized organizations, each one of those centralized entities represent a single point of failure:
A single point of failure (SPOF) is a part of a system that, if it fails, will stop the entire system from working.
Take, for example, the electrical power companies. Such companies are typical examples of centralization. If such a company fails for any reason, the whole state/province that depends on it will fail with it.
Imagine if electrical power was decentralized, i.e. if we had so many power producers instead of one. In such a scinario, the risk would be minimal. If one producer fails for some reason, we would have many alternative producers to cover for it.
Moreover, centralized systems are so attractive for attackers and hackers. Centralized exchanges are prominent examples. Because money is concentrated in one place, it becomes so worthed to try to hack it. Decentralized systems, on the other hand, are much safer and less prone to hacks.
4- Geographical Limitations
A central organization might be able to do its job very well. Yet, it will always be limited to certain city/region. because of that, about 4 billion people are deprived of basic services like proper education, banking, and official documentation. Decentralization is a perfect solution for this problem.
5- Failure To Scale / Less Efficiency
Another problem with centralization is the failure to scale. A central entity, however big it is, has its limitations. A centralized server, for example, can serve so many clients. When it reaches its limits it fails to play its role.
Moreover, in a centralized system, the decision is made by few people (sometimes by one person!). Such a decision-maker cannot absorb all the information needed to make the right decision. There is "bandwidth limit" to the flow of information. This makes the decision poorer and poorer. Therefore, as the number of people that this entity serves grows, the quality and efficiency of the service become less and less.
Decentralized systems can scale much better. In fact, a decentralized system might perform better as the number of users increases. A noticeable example of that is BitTorrent.
Now, What About Steem, and Steemit?
Now that we understand the advantages of decentralization. We should be able to evaluate different projects and determine how decentralized they really are. Let's start with Steem and Steemit. How decentralized they really are? I will investigate that in my next post.
Please tell me what you think in the comments.
I wish you would have writing about the benefits of centralization I do understand and agree with the issues you have put forward, and I also agree we need a better way, but do we really want decentralized money? I mean what is the real problem with money? I mean besides the fact that most of us do not have enough of it. With decentralization there is no one to deal with when things go wrong. There is no central place to complain to when the money does not work or it get stolen. We can be cheated by those who find ways to get around the way the system works but there is no one in control. There is also no standard for anything. As an example how do we know the price difference between Steem and Bitcoin is accurate? Who sets it and how do we know it will not change drastically in the next ten seconds as many currencies do. Also decentralization does not end corruption, it only makes it harder and when quantum computing comes along in the next 5 to 7 years, it will actually be easier perhaps. Centralization stabilizes things so that commerce and safety can be put into force. without it there are as many problems created and potentially more than with it. These are all issues to consider. Who makes the decisions about this. I mean do we want groups who we cannot even identify playing with our currency? Just some questions for us all to consider as we run toward the idea of decentralization. Not true decentralization because at the end of the day all of these cryptos are controlled by groups. Thanks and I would love to hear your thoughts.
Appreciate the skepticism @davidallenjones. It is always healthy to ask questions. The only thing I will say is that while I agree we may not need decentralization in every aspect of our society, money is one of the best use cases for decentralization.
As our current system operates, the value of our money is determined by a select few unelected officials at the IMF, BIS, and in central banks. These unelected officials are really running the show, and hardly anyone pays any attention to them. This allows them to do whatever they please, use complex sounding language to appear friendly and all-knowing, promote shady political agendas, various other unmentionables, all while devaluing the value of our hard earned savings.
This is a topic I really care about and actively write about, so I encourage you to read a bit of my material. I also highly recommend anyone reading this read the book below. It was quite the eye opener for me several years ago when I went down the rabbit hole.
Thanks for the thoughtful comments. I am really familiar with this topic and am writing a series of papers on the the subject as well. I am also familiar with the book and have it here. It is definitely a mind blower. My points though go to the question of what is a better system and is the current problem due to the people or the actual system? I cannot imagine a system that is "decentralized when we talk about currency. People use that word about cryptocurrencies yet are they really? Steemit has those who oversee things and favor is paid some over others based on some predetermined sense of merit. I did not have a say in that and probably neither did you. I love the concept but putting it into action is at best extraordinarily difficult. Kind of like the perfect society. Funny I am a dreamer for sure but I think as I get older I want so bad to see change happen that I am reluctant to go out to far on a limb because I have seen it break behind me too many time. I do feel that we are in a time of great change, but I feel just as certain that we may have been sold too much just to get us excited. And I personally do not think the oversell was necessary. the industry is dynamic and disruptive, but disrupting the money system. I really have to see the replacement and for now I do not think I have seen it yet. Again not saying it is not here nor that it will not come, only that what has been presented hasn't been a viable solution in my humble opinion. Cryptos each have their individual problems some of which are known and others that will present themselves if/when they scale. I hope t be a part of the change however it takes shape because as we can both agree on, there needs to be a change for the better. Also it is my understanding that Steem has built in inflation meaning that they wil not stop minting tokens. Is this accurate? Finally I will read your other articles. Thanks and keep pushing for a better future for us and our families.
Thank you, @davidallenjones for the thoughtful comments.
1- I have talked about centralization and why we need it in a previous post. Please check it out.
The idea of decentralization is to replace the current centralized systems with decentralized systems that perform the same function and service without the problems that come from centralization.
2- This is the vision. I agree with you that it has not materialized, yet! But It is possible, and serious steps towards achieving that goal has been taken. We are not there yet, but we are on the way. We are still experimenting with cryptos, and until now, the results are so hopeful. Cryptocurrencies have the potentail to solve some big problems in our world.
3- There are many projects claiming to be decentralized while they are really not. That is why I am trying to evaluate some interesting crypto projects to determine how decentralized they really are. I shall start with Steem soon. It is very probable that I would find that it is not that decentralized.
4- As for money especially: we have witnessed outrageous crises in so many areas in the world because of centralized money. So, the problems that you are worried about are there now with fiat money. We have seen that BTC was able to solve some of them. For example, with BTC, you are able to send money to anyone in the world. There is no geographical limitation. You do not need any permission from any entity. Of course, BTC has its problems, but we are working on solving them.
Good question!
How decentralized are Steem and Steemit really?
As long as there is a small group to whom power can be attributed that power is likely to be abused. Even when those people have good intentions!
The discussion on the reward pool structure and the actions of certain (furry) users laying down the law, shows that it's not as decentralized as one might think. Interesting topic, you got my follow.
Thank you, @news-today.
Why do you think power is concentrated? Is it because of whales owning a big percentage of Steem tokens?
Do you see other signs of centralization?
Yes, the majority of the tokens and with that the voting power is in the hands of a small group. With great power comes great responsibility and I hope those few that are actually in control act according to this.
Another sign of centralization is the so called self proclaimed Steemit police force, who with delegated SP from those same few lay down the law.
Don't get me wrong. It could very wel be that the best thing for Steemit is a benevolent dictatorship, but that requires dictators that see the bigger picture here.
What police force? Do you mean Steem Cleaners?
No Steem Cleaners does a great job and they are curtious enough.
Then which police force do you mean?
I don't think that Steem is that decentralized. The power is concentrated in the hands of few whales.
Thank you very much. good job
I would love to see how the world operates without the big banks and their hold on governments. I would hope that we would see a freedom that is true and not just a facade. Thanks for sharing this post, i think it is imperative that people know how this effects not just us here in the U.S but the entire world economy. I would love to see how we would operate without the puppeteers.
You just made a good point there, the excess power that nations and countries hand over to their government especially the centralized gov. is too much, given those in power no option than to do what they like and wish. The option of decentralized gov. is definitely a better option if done in the right way. The world is always flooded by excessive corrupt government. Thanks for sharing.
very good ... indeed corruption is very harmful to a communi .. Nice @sadekj
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I really like this post It is very explanatory
Hi @sadekj and Everyone,
Our team, @EOS9CAT came with a very short explanation and hope it would be helpful for everyone here.
Distributed means not all the processing of the transactions are done in the same place. This does not mean that those distributed processors aren't under the control of a single entity. (Think of gas stations, there are Shell stations all over yet all are Shell)
Decentralized means that not one single entity has control over all the processing. By nature, this implies that it is distributed among various parties.
If you need any other questions, please feel free to send us an email at info@eos9cat.com or visit our website