If you were wondering about the off-season post about whether you believe in Santa Claus, today you get your answer. It's not that decentralization in itself is fraud. But it is used to cover fraudsters, under the principal of blaming the execution, not the design.
What is a decentralized (trustless) scheme?
Decentralization solves the issue of building trust - or the lack of trust to people we see or hear for the first time. An application that cannot have its execution tampered, is more trustworthy than one that can be tampered, correct? Correct. A network of people cannot alter the execution of an application, if they know they cannot change the outcome - since this outcome should match the outcome of the majority of the network participants. It's like math: 9+9 is always 18.
The importance though lies elsewhere
Let's take that math. We all know that 9+9 is always 18. It's third grade calculus, right? Right. If you are counting on the decimal system. On the hexadecimal system though, the result is not 18. Actually, it can never be 18. Depending on whether letters come before or after numbers in numbering, the simple 9+9 has two answers, equally correct.
Even number 9 has not the same meaning in the two hexadecimal numbering systems. In the first one, it means 9. But in the other, it means what in our decimal system would be 16. The machines executing those calculations will do the math in the numbering system they are instructed to, and the outcome is always the same. But what if at some point, the author of the app decides to change from decimal to hexadecimal A, or hexadecimal B? Or first to hexadecimal A, and then to hexadecimal B? The outcome in all machines would be the same. But it's not going to be the same as in the system used before the change. The thing is that the machines cannot tell the difference between the two outcomes, because they are not programmed to check for consistency or backward compatibility for that matter. They are programmed to simply do the calculations.
You have certainly heard about Ethereum 2.0, and how it's going to be better than the original Ethereum. But do you really know what's in the Ethereum 2.0 code? Do machines executing the code decide whether the code executed is malicious or not? Of course they don't. They don't because they can't. You have to trust that Vitalik Buterin and the team of developers, know what they are doing, and that they are honest enough not to put malicious code in the Ethereum 2.0 (or the original Ethereum).
In Bitcoin, things are even shadier. Satoshi Nakamoto is practically a nobody. Most of the other original dev and testing team members are either dead or unknown - or withdrawn from the project long time ago. There is a team of developers doing upgrades, but do you know who they are? Are they somehow liable if in one of those upgrades, some malicious code is injected?
And if this happens with the crypto-asset infrastructure, imagine what is possible with the so called smart contracts. Do you think the average user can read and comprehend what the contracts say in their code? They have to trust what their wallet interface tells them. But you can never tell than your wallet software provides you all the information executed in each contract. In reality, when you authorize interaction with a contract, you only receive information about the immediate outcome. What about if this outcome is only the top of the iceberg? What if the contract allows the contract author to transfer from your wallet for as long as this authorization is valid, unlimited units of any given crypto-asset? And guess what? Every decentralized exchange smart contract does exactly that. And the funny thing? It's right in front of your eyes. If yo go to read the details of the contract call, all data are there. But chances are, you have never taken the time to read those details. And who are those guys writing the contracts? Do we know they are not a team of fraudsters? Would you give access to your fiat money wallet or bank account to just anyone?
Can you imagine Bernie Madoff running his Ponzi scheme on a decentralized network? He would have never ended up in jail.
You need to ask yourself a few questions
Actually it's a set of simple questions: Why the crypto-asset developers have made you believe that once a system is decentralized in the execution part, it should be trusted blindly? Why they have made you believe that since execution is trustworthy, so is the code executed? Who are the guys pocketing the fees and (hopefully) paying the bills on any given decentralized project? Why there is no mention of an entity (either a company or a person) in any of those projects, until the FBI, or a DA, or the SEC initiates an investigation?
And although the questions are simple, the answers may not be as simple as the questions asked. But then again, you said you don't believe in Santa Claus, right?
