Decentralization in blockchain

DECENTRALIZATION
Dr.T.M.SARAVANAN
Associate Professor,
Department of Computer Applications,
Kongu Engineering College,
Perundurai – 638 060.

DECENTRALIZATION
 Decentralization is not a new concept.
 It has been used in strategy, management, and the government, for a
long time.
 The basic idea of decentralization is to distribute control and
authority to the peripheries of an organization instead of one central
body being in full control of the organization.
 This configuration produces several benefits for organizations, such
as increased efficiency, expedited decision making, better motivation,
and a reduced burden on top management.
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DECENTRALIZATION
 The fundamental basis of blockchain is that no single central
authority is in control, and, here we present examples of various
Methods of decentralization and Routes to achieve this.
 Furthermore, we will discuss the decentralization of the Blockchain
Ecosystem, Decentralized Applications, and Platforms for
achieving decentralization.
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DECENTRALIZATION USING BLOCKCHAIN
 Decentralization is a core benefit and service provided by blockchain
technology.
 By design, blockchain is a perfect vehicle for providing a platform
that does not need any intermediaries and that can function with
many different leaders chosen via consensus mechanisms.
 This model allows anyone to compete to become the decision-
making authority.
 This competition is governed by a consensus mechanism - Proof of
Work (PoW).
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 Information and Communication Technology (ICT) has
conventionally been based on a centralized paradigm whereby
database or application servers are under the control of a central
authority, such as a system administrator.
 With Bitcoin and the advent of blockchain technology - which allows
anyone to start a decentralized system and operate it with no single
point of failure or single trusted authority.
 The following diagram shows the different types of systems that
currently exist: central, decentralized, and distributed.
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 Centralized systems are conventional (client-server) IT systems in
which there is a single authority that controls the system, and who is
solely in charge of all operations on the system.
 All users of a centralized system are dependent on a single source of
service.
 The majority of online service providers including Google, Amazon,
eBay, Apple's App Store, and others use this conventional model for
delivering services.
 A Distributed system, data and computation are spread across
multiple nodes in the network.
 Sometimes, this term is confused with parallel computing.
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 The main difference between these systems is that in a parallel
computing system, computation is performed by all nodes
simultaneously in order to achieve the result.
 Example - weather research and forecasting, simulation and financial
modeling.
 On the other hand, in a distributed system, computation may not
happen in parallel and data is replicated across multiple nodes that
users view as a single, coherent system.
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 The critical difference between a decentralized system and
distributed system is that in a distributed system, there still exists a
central authority that governs the entire system; whereas, in a
decentralized system, no such authority exists.
 A Decentralized system is a type of network where nodes are not
dependent on a single master node; instead, control is distributed
among many nodes.
 A significant innovation in the decentralized paradigm that has given
rise to this new era of decentralization of applications is
decentralized consensus.
 This mechanism came into play with Bitcoin, and it enables a user
to agree on something via a consensus algorithm without the
need for a central, trusted third party, intermediary, or service
provider.
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METHODS OF DECENTRALIZATION
 Two methods can be used to achieve decentralization:
Disintermediation and
Competition (Contest-driven decentralization)
1. Disintermediation
 The concept of disintermediation can be explained with the aid of
an example:
 Imagine that you want to send money to a friend in another
country.
 You go to a bank who, for a fee, will transfer your money to the
bank in that country.
 Here the bank maintains a central database that is updated,
confirming that you have sent the money.
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METHODS OF DECENTRALIZATION
 With blockchain technology, it is possible to send this money
directly to your friend without the need for a bank.
 All you need is the address of your friend on the blockchain.
 This way, the intermediary; that is, the bank, is no longer
required, and decentralization is achieved by
disintermediation.
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2. Contest-driven decentralization
In the method involving competition, different service providers
compete with each other in order to be selected for the provision of
services by the system.
In the context of blockchain technology, a system can be
envisioned in which smart contracts can choose an external data
provider from a large number of providers based on their reputation,
previous score, reviews, and quality of service.
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ROUTES TO DECENTRALIZATION
 Even though there were systems that pre-existed blockchain and
Bitcoin, including BitTorrent and the Gnutella file sharing system,
which to a certain degree could be classified as decentralized.
 However, with the advent of blockchain technology, many initiatives
are now being taken to leverage this new technology for achieving
decentralization.
Example: First Choice – Bitcoin
Alternatively, Ethereum - serve as the tool of choice for
many developers for building decentralized applications.
 As compared to Bitcoin, Ethereum has become a more prominent
choice because of the flexibility it allows for programming any
business logic into the blockchain by using smart contracts.
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ROUTES TO DECENTRALIZATION
How to decentralize
 The framework raises four questions whose answers provide a clear
understanding as how a system can be decentralized:
1. What is being decentralized?
2. What level of decentralization is required?
3. What blockchain is used?
4. What security mechanism is used?
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ECOSYSTEM DECENTRALIZATION
 To achieve complete decentralization, it is necessary that the
environment around the blockchain also be decentralized.
 The blockchain is a distributed ledger that runs on top of
conventional systems.
 These elements include
storage,
communication, and
computation.
1. Storage
 Data can be stored directly in a blockchain, and with this fact it
achieves decentralization.
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 However, a significant disadvantage of this approach is that a
blockchain is not suitable for storing large amounts of data by design.
 A better alternative for storing data is to use Distributed Hash Tables
(DHTs).
 DHTs were used initially in peer-to-peer file sharing software, such as
BitTorrent, Napster, Kazaa, and Gnutella.
 There are other alternatives for data storage, such as Ethereum
Swarm, Storj, and MaidSafe.
 Ethereum has its own decentralized and distributed ecosystem that
uses Swarm for storage and the Whisper protocol for communication.
 MaidSafe aims to provide a decentralized World Wide Web.
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 BigchainDB is another storage layer decentralization project aimed at
providing a scalable, fast, and linearly scalable decentralized
database as opposed to a traditional file system.
 BigchainDB complements decentralized processing platforms and file
systems such as Ethereum and IPFS.
2. Communication
 The internet (the communication layer in blockchain) is considered to
be decentralized.
 This model is based on unconditional trust of a central authority (the
service provider) where users are not in control of their data.
 Even user passwords are stored on trusted third-party systems.
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 Thus, there is a need to provide control to individual users in such a
way that access to their data is guaranteed and is not dependent on a
single third party.
 Access to the internet (the communication layer) is based on Internet
Service Providers (ISPs) who act as a central hub for internet
users.
 If the ISP is shut down for any reason, then no communication is
possible with this model.
 An alternative is to use mesh networks.
 Even though they are limited in functionality when compared to
the internet, they still provide a decentralized alternative where nodes
can talk directly to each other without a central hub such as an ISP.
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 Example: Firechat – iphone
 Now imagine a network that allows users to be in control of their
communication; no one can shut it down for any reason.
 This could be the next step toward decentralizing communication
networks in the blockchain ecosystem.
3. Computing power and decentralization
 Decentralization of computing or processing power is achieved by a
blockchain technology such as Ethereum, where smart contracts with
embedded business logic can run on the blockchain network.
 Other blockchain technologies also provide similar processing-layer
platforms, where business logic can run over the network in a
decentralized manner.
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The following diagram shows a decentralized ecosystem overview.
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 At the bottom layer, the internet or Meshnets provide a
decentralized communication layer.
 On the next layer up, a storage layer uses technologies such as
IPFS and BigchainDB to enable decentralization.
 Finally, at the next level up, you can see that blockchain serves as
a decentralized processing (computation) layer. Blockchain in
a limited way, provide a storage layer too, but that severely
hampers the speed and capacity of the system.
 Therefore, other solutions such as IPFS and BigchainDB are more
suitable to store large amounts of data in a decentralized way.

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 The Identity, Wealth layers are shown at the top level. Identity on
the internet is a vast topic, and systems such as BitAuth and
OpenID provide authentication and identification services with
varying degrees of decentralization and security assumptions.
 The blockchain is capable of providing solutions to various issues
relating to decentralization.
 A concept relevant to identity known as Zooko's Triangle
requires that the naming system in a network protocol be secure,
decentralized, and is able to provide human-meaningful and
memorable names to the users.

DECENTRALIZATION
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Smart contracts
 A smart contract is a decentralized program.
 Smart contracts do not necessarily need a blockchain to run;
however, due to the security benefits it provides, blockchain has
become a standard decentralized execution platform for smart
contracts.
 A smart contract usually contains some business logic and a
limited amount of data.
 The business logic is executed if specific criteria are met.
 Actors or participants in the blockchain use these smart contracts,
or they run autonomously on behalf of the network participants.

DECENTRALIZATION
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Decentralized Organizations
 DOs are software programs that run on a blockchain and are
based on the idea of actual organizations with people and
protocols.
 Once a DO is added to the blockchain in the form of a smart
contract or a set of smart contracts, it becomes decentralized and
parties interact with each other based on the code defined within
the DO software.

DECENTRALIZATION
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Decentralized Autonomous Organizations
 Decentralized Autonomous Organization (DAO) is also a
computer program that runs atop a blockchain and embedded
within it are governance and business logic rules.
 DAO and DO are fundamentally the same thing.
 The main difference, however, is that DAOs are autonomous,
which means that they are fully automated and contain artificially-
intelligent logic.
 DOs, on the other hand, lack this feature and rely on human input
to execute business logic.

DECENTRALIZATION
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Decentralized Autonomous Corporations
 Decentralized Autonomous Corporations (DACs) are
similar to DAOs in concept, though considered to be a
smaller subset of them.
 The definitions of DACs and DAOs may sometimes overlap,
but the general distinction is that DAOs are usually
considered to be nonprofit; whereas DACs can earn a
profit via shares offered to the participants and to whom
they can pay dividends.
 DACs can run a business automatically without human
intervention based on the logic programmed into them.

DECENTRALIZATION
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Decentralized Autonomous Societies
 Decentralized Autonomous Societies (DASs) are a
concept whereby an entire society can function on a
blockchain with the help of multiple, complex smart
contracts and a combination of DAOs and Decentralized
Applications (DApps) running autonomously.
 This model does not necessarily translate to a free-for-all
approach; instead, many services that a government
commonly offers can be delivered via blockchains, such as
government identity card systems, passports, and records
of deeds, marriages, and births.

DECENTRALIZATION APPLICATIONS
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DApp examples
 Examples of some decentralized applications are provided
here.
1. KYC-Chain
 This application provides the facility to manage Know Your
Customer (KYC) data securely and conveniently based on
smart contracts.
2. OpenBazaar
 This is a decentralized peer-to-peer network that enables
commercial activities directly between sellers and buyers
instead of relying on a central party, such as eBay and
Amazon.

DECENTRALIZATION APPLICATIONS
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 DHTs are used in a peer-to-peer network to enable direct
communication and data sharing among peers. It makes
use of Bitcoin and various other cryptocurrencies as a
payment method.
3. Lazooz
 This is the decentralized equivalent of Uber. It allows peer-
to-peer ride sharing and users to be incentivized by proof of
movement, and they can earn Zooz coins.

PLATFORM FOR DECENTRALIZATION
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 Today, there are many platforms available for
decentralization.
 In fact, the fundamental feature of blockchain networks is to
provide decentralization.
 Therefore, any blockchain network such as Bitcoin,
Ethereum, Hyperledger Fabric, or Quorum can be used to
provide decentralization service.
 Many organizations around the world have introduced
platforms that promise to make distributed application
development easy, accessible, and secure.
 Some of these platforms are described below,

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1. Ethereum
 Ethereum tops the list as being the first blockchain to
introduce a Turing-complete language and the concept of a
virtual machine.
 With the availability of its Turing-complete language called
Solidity, endless possibilities have opened for the
development of decentralized applications.
 This blockchain was first proposed in 2013 by Vitalik
Buterin, and it provides a public blockchain to develop smart
contracts and decentralized applications.
 Currency tokens on Ethereum are called Ethers.

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2. MaidSafe
 MaidSafe provides a Secure Access For Everyone (SAFE)
network that is made up of unused computing resources,
such as storage, processing power, and the data
connections of its users.
 The files on the network are divided into small chunks of
data, which are encrypted and distributed randomly
throughout the network.
 This data can only be retrieved by its respective owner.
 One key innovation of MaidSafe is that duplicate files are
automatically rejected on the network, which helps reduce
the need for additional computing resources needed to
manage the load.
 It uses Safecoin as a token to incentivize its contributors.

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3. Lisk
 Lisk is a blockchain application development and
cryptocurrency platform.
 It allows developers to use JavaScript to build decentralized
applications and host them in their respective sidechains.
 Lisk uses the Delegated Proof of Stake (DPOS) mechanism
for consensus whereby 101 nodes can be elected to secure
the network and propose blocks.

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3. Lisk
 It uses the Node.js and JavaScript backend, while the
frontend allows the use of standard technologies, such as
CSS3, HTML5, and JavaScript.
 Lisk uses LSK coin as a currency on the blockchain.
Another derivative of Lisk is Rise, which is a Lisk-based
decentralized application and digital currency platform.
 It offers a greater focus on the security of the system.

Decentralization in blockchain

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