Considerations for full decentralized blockchain
August 2, 2018
August 2, 2018
“Technological, political, social considerations to realize fully decentralized Blockchain technology”
If we were to choose one of the hotly debated issues related to the blockchain technology, it would be the decentralization of a network. The main reason is that such a property of blockchain technology allows trustless identification as well as the authentication of data without trusted third parties. This opens up a new horizon of opportunities and potential within the global, anonymous network that we call internet.
Since the advent of Bitcoin, the scalability issue of blockchain technology is constantly gaining traction. The scalability issue stems from the unique architect of blockchain network that requires every participant to own a same copy of transaction data. Therefore, as a number of participants rapidly grows, the limited capacities of network and storage can only process a certain amount of transactions in a given time period, necessitating the more scalable solution for the network.
These are the factors that must be considered when enhancing the blockchain technology: decentralization, scalability, and safety. These factors are intimately correlated with one another, and such a correlation is famously referred to as ‘trilemma.’
In short, these three factors cannot be improved all together, but the mechanism works similar to the exchange of equivalents, where one or two factors are improved by the cost of the remaining factor. Although Vitalik Buterin, the founder of Ethereum, once also mentioned these three factors in describing ‘Scalability Trilemma,’ if you look closer to the subject, the issue boils down to the conflict between centralization and decentralization.
In processing block data, the responsibilities of nodes can be separated into those producing blocks and those producing data. The separation of responsibilities among different nodes allows to find the optimal middle ground between decentralization and centralization, where the proper positioning of nodes can increase the efficiencies in scalability. However, there must be a careful consideration as to distributing the responsibilities among different nodes because if too much influence is given to a specific node, the core principle of decentralization is directly at stake. In reality, a small portion of Bitcoin mining pools accounts for a significant majority of hash power in the Bitcoin network, and several blockchain networks adopting PoS(Proof of Stake) algorithm, such as NEO, cannot overcome the centralization of consensus power in the form of centralization of money.
Moreover, there is an alternative solution for improving scalability while maintaining decentralization by combining on-chain and off-chain protocols. But the safety issue arises as a small group of off-chain nodes handling the original copy of blockchain data, which opens up a possibility of few-points-of-attack failure. On the other hand, if many different nodes handle the original copy of blockchain data, decentralization is improved, but scalability declines and a different form of safety issues, such as the chain split, is introduced. Overall, the trilemma of blockchain technology signifies the exchange of equivalents between the opportunity costs of decentralization and the benefits of centralization.
Blockchain technology can fully realize its potential only through a proper decentralization. In order to do that, we must dissect and learn what decentralization really means and suggest appropriate solutions accordingly. Before I can suggest a solution to the problem, the in-depth analysis of Vitalik’s diagnosis of trilemma through architectural, political and logical perspectives must take place. To give you a brief conclusion of what my analysis leads to, the decentralization of blockchain technology cannot be solved by platform-level approaches, but it requires implementation of political and structural elements to the platform.
What I listed above will have three parts to it. First of all, I will explain the trilemma using examples that suppose the application of blockchain technology in our daily lives. For the ease of understanding, I will reference our on-going project called Hunimal as an example to illustrate service-oriented trilemma cases. Second, the analysis of 1st, 2nd, and 3rd generation blockchains will take place in diagnosing their current levels of decentralization and suggesting necessary improvements. Finally, I will integrate a complete, decentralized blockchain model with ‘Hunimal Blockchain’ services and illustrate specific solutions to the decentralization of the blockchain technology.