How often do we hear the term “decentralized database”, or, regulation through consensus? However, hardly anyone asks what decentralization is. We accept the technical term because, compared to the traditional system, cryptocurrencies are a real revolution.
In Bitcoin there is no entity or small group essential to the operation, nor are they able to censor or reverse transactions. The system works 24 hours a day, and anyone can independently audit the amount of coins in circulation, submit their own transactions, and validate the entire movement history.
In the Stock Exchange and Central Banks, on the other hand, it is based on “trust”, and the user, no matter how influential, depends on third parties to move and store their assets.
What is decentralization?
It is utopian and theoretical, a total absence of power or influence in the coordination of the system. Any participant in the system has the same capacity, knowledge, technical skill, and ability to interfere with the functioning of the network. It is obvious that this does not exist.
Furthermore, decentralization is not an end but a means. Bitcoin’s goal is to make it as difficult as possible for a small group, however powerful, to take control of the network. In this case, we are talking about carrying out unauthorized transactions or censoring participants.
Why is Bitcoin not decentralized?
In Bitcoin there are the miners, entities that put their specialized powerful machines to find the solution of the code that joins the new block of data to the existing blockchain sequence.
In fact, if a group with power (hashrate) enough to join, is able to generate data containing invalid transactions. Thus, it is up to the users themselves to coordinate to ignore this sequence of transactions.
Also, most users do not have the software (node) to validate the transactions on its own. Even among enthusiasts who do, many lack the technical knowledge to validate source code or participate in technical debates.
Is decentralization really a myth?
Yes. Decentralization is a scale, ranging from 0 to 99, but never reaching 100. Ultimately, Bitcoin is “ruled” by users, and this was proven in the dispute for the scalability solution, the increase in the capacity of network processing.
In summary, users were against increasing block size, something that was supported by 80% of miners, as well as large exchanges and custodians. The move became known as NO2X, and the losing side was the clone-currency Bitcoin Cash (BCH).
Finally, the value of decentralization is only understood when the project comes under a major coordinated attack. That’s what makes Bitcoin so valuable, its resilience to attacks.