most transformative aspect of blockchain technology is its capacity to
decentralize systems of exchange and therefore lessen the threat of corruption
posed to centralized entities, such as governments, banks and corporations.
Bitcoin has the capacity to assist those in unbanked nations to enter the
global economy by eliminating the cost-prohibitive hurdles of acquiring a bank
account and paying high transaction and exchange fees to trade across borders.
Decentralized systems can empower people in oppressed nations to resist tyranny
and web users to protect themselves from unwanted surveillance.
benefits of decentralization may be clear, but the path to achieving it is
often more ambiguous. A recent Medium post, “Quantifying
Decentralization,” coined the term “Nakamoto coefficient” to describe the
level of decentralization within a network. The article addresses the fact that
if any of the subsystems within a decentralized network become compromised, the
entire network is impacted. It goes on to break down the theory behind
simple terms, a system is most decentralized when value is spread equally
amongst its users. The opposite of decentralization is centralization; in the
most extreme case of centralization, all value is held and controlled by a
single entity. Applying this theory to the Bitcoin blockchain entails an
examination of the set of decentralized subsystems composing the blockchain (i.e.,
mining, exchanges, nodes, developers, clients, etc.). If any single subsystem
becomes more centralized, the entire Bitcoin blockchain becomes less
centralized, and, therefore, less secure. The Nakamoto coefficient can be used
to determine the minimum level of decentralization required for ensured
security and functionality.
theoretical questions pertaining to decentralization should be taken into
account when building distributed networks. By becoming aware of levels of
reliance on centralized subnetworks, developers can work to correct for any
bottlenecks in distribution. Game theory and economic incentive models can
assist in achieving ideal levels of decentralization.
these theories in context, take the AdLedger consortium as an example. The goal of AdLedger is to create
a layer of infrastructure that the ad tech ecosystem can rely upon, creating a
peer-to-peer network with a common “ledger” from which to read and write. In
order for adoption to occur and value to be created, we need to pick the right
battles first. Measuring and thinking through what benefits decentralization
brings to each working group — including those dedicated to General
Data Protection Regulation (GDPR), reconciliation, payments, data security
and targeting — will need to be the first tasks at hand.
important to remember that blockchain technology is not an inevitable harbinger
of change, especially if blockchain networks fail to live up to the promise of
decentralization. By measuring levels of decentralization and how close they
are to delivering on that promise, developers are more likely to succeed in
building systems that are more secure, transparent and democratic. Should
systems achieve true decentralization, these networks are likely to overtake
centralized networks and disrupt many industries as we understand them today.
Disclosure: Adam Helfgott is the CEO
and co-founder of MadHive, which is a founding member of the AdLedger