Decentralization & Governance: Can Bitcoin Have the Best of Both?

By August 14, 2016Bitcoin Business

Ariel Deschapell is content manager for blockchain real estate startup Ubitquity, and a recent Henry Hazlitt fellow at the Foundation for Economic Education. In this opinion piece, Deschapell argues that in order to solve issues around decentralized governance, the blockchain community must ask difficult questions about what kind of decentralization solutions need. Since the earliest days of bitcoin, decentralization has been key to its value proposition. But it’s also been its greatest obstacle. Whether it’s the block size debate , or the ethereum classic debacle more broadly, decentralization in public blockchain networks presents significant hurdles to what can seem like straightforward objectives. After seven years of open-source study, decentralized governance remains a little explored and unsolved enigma. But solving it will likely mean going back to the beginning, asking what exactly we mean by ‘decentralization’. Do we mean the distribution of hash power? The number of nodes? The inherent ability to fork and secede as recently demonstrated by ethereum? The exact definition of decentralization in cryptocurrency debates depends on the context. Yet, semantics and technical terms tend to obscure the fact that, at its heart, "decentralization" refers to a system of voluntary cooperation between peers. Efficiency trade-offs Decentralization is a means to an end. As a tool, it is not optimal for every possible use case. In fact, decentralization tends to be incredibly inefficient compared to centralized solutions. When it comes to transaction throughput, for example, bitcoin lags far behind centralized payment networks like MasterCard or Visa. Yet, network distribution is a necessary prerequisite for preserving the consensus rules that give bitcoin its value, such as immutability and progressive reward halvings . Distribution of the network promotes extreme redundancy to safeguard against censorship and attacks that would threaten these well-defined consensus rules. This comes at the inherent expense of […]

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