Dug Campbell

How to Define Decentralisation

I’ve just finished reading ‘The Master Switch’ by Tim Wu. It’s a history of information empires, covering radio, telephone, satellite television and the internet. One of the recurring themes is the constant evolution in each case between open and closed, centralised and decentralised systems – something that Wu calls ‘The Cycle’.

It’s a topic that’s permanently relevant to the nascent crypto industry where despite many of the ideological claims to the contrary, true decentralisation remains for the most part far away in practice. And it’s one that I spend a fair amount of time thinking about given the work we’re doing with the SAFE Network.

So it was interesting to read the ‘Four Horsemen of Centralisation’ by Ali Yahya of a16z Crypto today. It’s a good companion piece to Vitalik’s ‘The Meaning of Decentralization’ from last year. He focuses on the fact that in practice, decentralisation comes down to a fairly simple question: how large the number of actors with power over the Network is. The bigger that number is, the less likely corrupting power can be wielded over such centralised actors. But it’s not as simple as saying a big number must be good. It also requires parties to be independent of each other plus those who do exercise power being broadly representative of the different stakeholders across the Network as a whole.

But who could these powerbrokers be? Yahya breaks it down into four memorable categories:-

  • The Gatekeeper
    Any party that controls access to the network (letting newcomers join as miners, validators or similar). This is a crucial requirement for any network that claims to be censorship-resistant and permissionless. But is it perceived or actual freedom? Proof-of-Work systems might see centralised hashing power or restricted access to the best mining chips. And Proof-of-Stake systems might see a concentration of validators. In either case, it’s clear that there’s a powerful difference between permissionless and equal opportunity for involvement.
  • The Enforcers
    Never to be underestimated, the enforcers are crucial for ensuring that rules are followed. They do this by running the code and centralisation is inevitable if they aren’t acting independently in a way that is a constant check on the actions of the others.
  • The Architect
    Who controls governance  (on-chain, off-chain) – and are they truly representative of the wider community on that network?
  • The Profiteer
    These might be early founders, perhaps with significant token holdings, thought-leaders – put simply, those in a position of influence over the other three classes of participants.

There’s often an overlap between the four in many crypto-networks at present but then again, the lines are often blurry when discussing decentralisation in any event. As Yahya writes in the post:

In the end, the question that matters when thinking about decentralization is the following: ‘Who exactly do you have to trust to believe that your interactions with a network will be fair?’ The vision that underlies the crypto movement suggests that the answer to this question should be “nobody”.

So it’s not a precise science (despite some attempts to move further in that direction). But it’s an important concept, if only to ensure that we are all broadly talking about the same topics when decentralisation comes up – and to ensure that people aren’t glossing over certain areas amongst the marketing hype.