Sirwin
Sirwin
Decentralization

Quick intro 101: Why does decentralization even matter?

By Keyboardwarrior | Crypto Bulletin | 24 Jan 2024


Although the posts I write are mostly for cryptocurrency enthusiasts of intermediate knowledge level and beyond, its sometimes easy in the bull run to gloss over concepts that are of a more basic. 

To decentralize or not to decentralise: Is that the question? – ΔNTYLLES

Now during a time of consolidation, it can be a good time to sit down and reflect on some of the concepts that you perhaps didn't dare to question because you didn't want to look like you didn't know what you were talking about.

Why is decentralization important in cryptocurrencies? People who are typically hostile to cryptocurrencies will tell you its because those involved in crypto want to dodge taxes and and buy drugs, weapons and fund terrorism and using a decentralized system to do so is an easy way to escape authorities. While there certainly are those who utilize these systems for those purposes its not the basic intent of the blockchain technology and not even remotely the greatest advantage if you put it like that.

To understand what problem blockchain technology tires to solve we can go back to the ancient civilizations. One of those ancient civilizations was called mesopotamia. Perhaps dissapointingly, the suviving sources of scripture from their society does not consist of the likes of homerian epics or grand tales of war and power struggles. But rather something as mundane as ledgers. These stored information in terms of trade, bartering and debts. I ate your chicken and therefore I owe you one, I traded five oxes so that you would give me a 10 amphoras of wine.

The power behind this is obvious as it allowed for deals transcending language and keeping the records straight with your neighbors, as you could look back and prove legally what had been decided on. 

Naturally, the problem with this system becomes obvious. How are you ever going to trust the person keeping the ledger from not changing it. What if he suddenly changes the ledger to say something I never agreed to and now I look like the one who snubbed him of 5 oxes when I actually delivered them fair and square?

To counter these problems, the system of dual ledgers was developed, where both sides keep ledgers of their own. However, this still doesn't tell us anything regarding which ledger is intact if they differ.

Today, we have advanced to a system of centralized ledgers where our banking system has the one agreed ledger, however, as with the riveting tale of the Lehman brothers and their forged ledger during the last economic crisis, this system is obviously just based on the authority of that centralized entity. We trust that this centralized ledger has not been forged, because its the Lehman brothers, one of americas oldest and most trusted credit institutions. It was not the numbers of the forged ledger itself that fueled the leadup to the financial crisis, bailing out the Lehman brothers would not have saved them, because it was the trust in the authenticity of this ledger and by extension the financial system that led to their downfall.

 

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