There is no universal rule on what makes a system decentralized.

People will often disagree with what "real" decentralization means.

Overall, I will ask three questions to determine whether we are looking at a centralized or decentralized system when studying cryptocurrencies and blockchains:

🌐 1. Is the network permissionless?

💻 2. Is the software these nodes run open-source – i.e., Open-Source Software (OSS)?

👥 3. Is the ledger‘s state-change consensus distributed between two or more servers (or nodes) run by different individuals, corporations, or groups that will hardly conspire to take control?

A clear “Yes” for these three pillars will define a decentralized system.

Adding some nuance to the equation, it’s easy to see how the third pillar is not all “black and white.” The more distributed the consensus (more nodes with a similar weight actively participating in changing the ledger’s state together), the more decentralized and secure a system is.

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What do you think?

Would you add any other pillar to decentralization?

Let me know your thoughts in the comment section.

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This is part of my recent article, Decentralized Finance (DeFi) Easily Explained. Link below. 👇