A Blockchain's Community Is More Important Than Its Degree Of Decentralization
BTC pools

A Blockchain's Community Is More Important Than Its Degree Of Decentralization

By Brennan | Crypto Investing | 9 Jul 2020


I'm sure I'm not the only one who would like to go to 2009 and start mining Bitcoin with a laptop. Back then one CPU equaled one vote, everyone had an equal chance of mining a block, and Bitcoin was truly decentralized.

Nowadays the hash power of the Bitcoin network is controlled by four corporate mining pools, and the concept of "decentralization" has become rather nebulous.

Ethereum mining is even more centralized. According to poolwatch.io, more than 50% of the hash power on the Ethereum network is controlled by two mining pools, Sparkpool and Ethermine.

Eth mining pools

Theoretically, these mining pools could collude to censor transactions on the network. The likelihood of that happening is quite low though, as it would put their significant investments at risk. Activity on both networks is closely monitored, and any chicanery would immediately be detected and published to social media.

Mining pools need to be extra cautious considering the amount of competition in the space now. Any perceived collusion would likely cause the value of the currency they're mining to drop, and may prompt investors to transfer their wealth to other chains.

In other words, the community is what keeps the miners honest, even though it's technically possible for the chain to be hijacked.

Decentralization itself is not the end goal. What we want is censorship-resistance and transparency. We want to know that our currency, tokens and NFTs (non-fungible tokens) are truly ours, and cannot be taken away by a government, company, or some other powerful group.

We now have Delegated Proof of Stake (dPOS) projects like EOS, WAX and Ultra, which many in the crypto space consider to be "centralized" blockchains when compared to Bitcoin or Ethereum. Some people go so far as to compare them to cloud service providers like Amazon Web Services (AWS).

But there's a difference. While there may be fewer nodes validating transactions, dPOS blockchains still offer a relatively high degree of transparency and censorship-resistance. The activity on these chains is closely monitored by the community, so the validators must remain honest or risk being voted out.

Other than a few suspected spam accounts being suspended shortly after the mainnet launch, there has still been no significant censorship of transactions on EOSIO-based chains. Until users start complaining about locked accounts or confiscated funds, I'll consider these chains relatively secure.

Censorship Incidents

There have been incidents of censorship on many major public blockchains.

  • In 2010 the Bitcoin community hard-forked the chain to reverse a transaction that generated 186 billion Bitcoin.
  • In 2016 the Ethereum community hard-forked the chain to return ETH stolen from the DAO by a hacker.
  • In 2018 shortly after the EOS mainnet launch, the ECAF ordered the freezing of several accounts that were suspected to be involved with fraud.
  • In 2020 the duly elected Steem Witnesses worked together to prevent the SteemIt account from spending funds after a private sale unbeknownst to the community had occurred.

In the first few years of any new blockchain project there are unforeseen issues and bugs that need to be worked out, and censorship happens. As the community matures and the chain becomes more established, the likelihood of intervention decreases.

Right now we are witnessing the birth of many blockchains, many of which will be with us for decades to come. Each new project has been able to learn from their predecessors, and improve upon them. The speed and governance of blockchains continues to evolve, and like-minded communities are forming to watch over and protect them.


Brennan
Brennan

Interested in computer science, economics, democracy and monetary theory. Supporter of projects that aim to bring more economic freedom to the world. Hoping to share knowledge that would help others navigate the crypto space.


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