Some joking words on the Internet often inadvertently discover some phenomena, but do not explain the reasons behind these phenomena. If we do in-depth analysis, we will often make good discoveries. From sorting out the second-layer knowledge of Bitcoin, to sorting out the application architecture of Web3, and the disappearance of Satoshi Nakamoto, I have a better understanding of decentralization.
1. Internet jokes: Satoshi disappears, SBF goes to jail, CZ is restricted
An interesting causal relationship appeared on the Internet: "The pie is strong because Satoshi Nakamoto has disappeared, Solana is strong because SBF has entered, and BNB is strong because CZ is about to enter, so why is Ethereum weak?" . For the rise of Ethereum, many people began to shout to "capture V God alive". Many people often laugh when they see such banter.
Source: Fu Shaoqing
Some joking words on the Internet often inadvertently discover some phenomena, but do not explain the reasons behind these phenomena. If we do in-depth analysis, we will often make good discoveries.
Why did Satoshi Nakamoto disappear? As the founder of Bitcoin, although the reason for his disappearance is unclear, there are several possible guesses:
Personal privacy protection: Satoshi Nakamoto may have chosen to disappear to protect his privacy and security. Because he is creating a cryptocurrency, and through previous research and accumulation, Satoshi Nakamoto feels that his "creation" is more likely to succeed. In order to avoid attracting too much attention and controversy in the real world , may also want to avoid too much attention and distractions. "Disappearing" is a good way.
Decentralization: Through research on Satoshi Nakamoto’s original remarks and emails, he considered a lot of the design of Bitcoin. He not only paid attention to the implementation of technology, but also considered many economic and sociological impacts. Another possible explanation for Satoshi’s disappearance is to ensure Bitcoin’s decentralization. He may believe that a system without a centralized leader can truly achieve freedom and independence. At the same time, this kind of decentralization can also prevent the concentration of power and prevent Bitcoin from being controlled by a few people or institutions, which is more conducive to the development and joint decision-making of the community.
The protection of personal privacy should not have much impact on Bitcoin, and decentralized design may be an important design consideration. Especially when compared with Ethereum and Buterin, the development route of Ethereum planned by Buterin has aroused many people's doubts. This is a relatively serious centralization. Decentralization is reflected in multiple levels and aspects. We will use some analysis later to see the role of decentralization from multiple observation angles and theoretical systems.
2. Basic concepts of decentralization
2.1. Decentralization, Distributed, Centralized
A common classification of system structures in the real world: Centralized, Decentralized, and Distributed. These are not only three common structures in technical implementation, but also three common structures in other industries such as social organizations. a common structure.
These three structures have related descriptions in the blockchain industry. I used this diagram with reference to Vitalik's article: "The Meaning of Decentralization".
Source: Fu Shaoqing
There are often some disputes about this picture in China, and it is believed that the "Decentralized" and "Distributed" picture logos are reversed. Explaining it from the perspective of control and decision-making should be able to eliminate this controversy and better understand Decentralized and Distributed. Regarding Centralized (A) in the figure, no matter which perspective you understand it from, there should be no controversy, so we only compare decentralization and decentralization.
Teacher Hong Shuning once said, “The essence of blockchain is decentralization.” This description is very accurate. In this article, we talk about blockchain and decentralization, generally referring to the same thing. Decentralized Decentralization is actually a decision-making center composed of multiple nodes. Its control and decision-making also require the participation of certain nodes. At this time, control and decision-making are called consensus. For example, only full nodes with mining capabilities in Bitcoin have the ability to determine the generation of new blocks and the content written into new blocks. Those nodes without mining capabilities are read-only nodes or verification nodes. In PoS and DPoS chains, this situation will be more obvious. Only consensus nodes can decide the data to be generated and written into new blocks. The difference between the synchronous algorithm and the asynchronous algorithm in the consensus protocol is also more obvious, which will determine the number of nodes that can be accommodated in the blockchain network.
In the decentralized system Distributed, there is no obvious center at all, only nodes. Any node can join or leave the network at any time, and its control and decision-making are local. This is also the reason why the distributed system can achieve very high performance. reason. Does this explanation eliminate the common disputes between Decentralized and Distributed?
Readers can refer to Teacher Hong Shuning's "Hong Shuning: Blockchain and Cryptocurrency" and Vitalik's "The Meaning of Decentralization". Comparing the contents of the two articles, it should be easier for many people to understand the meaning and understand the boundaries of some concepts. For the schematic diagram, I used the schematic diagram from Vitalik's article. The "Distributed" in this diagram refers to a broader distributed system, such as Lightning Network, Nostr, eDonkey Download and other systems.
Based on the summary I made when compiling relevant information on Bitcoin’s second-layer construction (see references), let’s compare the main characteristics of blockchain systems (decentralization), decentralized systems, and centralized systems. These features may lead to disputes in understanding and inaccuracies in summary. We only need to pay attention to the significant differences, such as the ability to trust the ledger.
Source: Fu Shaoqing
(1) Advantages and disadvantages of decentralization (blockchain system)
The advantages and disadvantages of decentralization (blockchain system) can be found in the table above.
Here is a quote from teacher Hong Shuning: From a computer system perspective, blockchain technology is a brand new decentralized system, but the most fundamental difference between blockchain and traditional decentralized systems lies in its decentralized nature. The meaning of decentralization is that no central controller can control the operation of the blockchain network. It can neither stop it nor manipulate the data in it. The destruction or wrong behavior of any node will not affect the entire system. This is the biggest problem with centralized systems. The decentralization feature brings three benefits to the blockchain: fault tolerance, attack resistance, and collusion prevention, thus making the blockchain an independent, credible, and anti-monopoly technical system that can be built on top of it. Storage and transfer of value and trust provide technical guarantees.
If you remember it concisely, you only need to remember the ability to trust the ledger, which is an ability that decentralized systems and centralized systems do not have. This is also the reason why cryptocurrencies only emerged after the blockchain system was produced.
(2) Advantages and disadvantages of decentralized systems
Advantages of decentralized systems:
Scalability: Nodes can be added or reduced at any time. The system has high scalability and improves fault tolerance.
High performance: Tasks can be processed in parallel to improve system performance, and each node can process different tasks at the same time.
Disadvantages of decentralized systems include:
Complexity: The design and implementation of decentralized systems are relatively complex, and issues such as communication, consistency, and data synchronization between nodes need to be considered, which increases the development and maintenance costs of the system.
Security: The security of decentralized systems is an important issue. Communication and data transmission between nodes need to be encrypted and authenticated to prevent data leakage and attacks.
Difficulty debugging: Due to the complexity of distributed systems, debugging and troubleshooting can be more difficult when problems arise in the system.
(3) Advantages and disadvantages of centralized structure
Advantages of centralized structure:
Simple control: There are clear controls and decision-makers to better organize and coordinate work.
High efficiency: Efficient concentration and management of resources can be achieved, and resource utilization efficiency can be improved.
Disadvantages of a centralized structure include:
Single point of failure: The failure of the central node may lead to the paralysis of the entire system, so the reliability of the system is low.
Privacy risks: The central node can access and control all data, which may lead to privacy risks.
Concentration of power: A centralized structure may lead to the problem of concentration of power, giving the central node greater control and decision-making power.
2.2. The embodiment of decentralization
When introducing the embodiment of decentralization, we need to often compare it with centralization. At the same time, we also break down the comparison between centralization and decentralization into several levels.
Note: This place is best sorted out by someone who has a deep understanding of the classification of philosophical knowledge systems, so that professional knowledge stratification will be more accurate. I mainly use the two levels of natural science and social science to describe it here.
Source: Fu Shaoqing
From the table above, we can see that decentralization can be reflected on multiple levels. We have been in the information age for many years, and our understanding of centralization and decentralization has produced many cases, often contrasting with local concepts. As described in Web1, Web2, Web3, Read, Write, Owner.
Decomposed at the natural science level, on the one hand is the centralization and decentralization at the software level. For example, the centralization and decentralization of information (data) release; the centralization and decentralization of information (data) management; the centralization and decentralization of accounts (identity); the centralization and decentralization of software architecture; ...;
On the other hand is the centralization and decentralization of hardware equipment. For example, in 2022, AWS and Cloudflare crashes included network and server centralization issues. At first, the issue of centralization and decentralization of hardware equipment was not paid attention to. After the cloud service provider crash incident, many people began to realize that if the hardware equipment is centralized, even if the software built on the upper layer is decentralized, Centralized, once someone can control these centralized hardware devices, the system built on these hardware devices cannot be considered completely decentralized.
The failure of foreign cloud service providers AWS and Cloudflare that occurred on June 21, 2022 caused the interruption of a large number of Web3 projects. Some people joked that as soon as these centralized data centers shut down, Web3 would become Web 0.3. This also shows the importance of decentralization of hardware equipment. Currently, cloud infrastructure is basically centralized.
Source: Fu Shaoqing
At the social science level, with the development of blockchain technology, DApps are becoming more and more abundant and reflected in more and more aspects. For example, the organizational form of DAO and various confirmation mechanisms for decision-making are already examples of centralization and decentralization in the sociological sense. The significance of the disappearance of Satoshi Nakamoto is also at this level. This disappearance is a very important decentralization. At present, no other blockchain system has been able to achieve this. At this stage, blockchain technology is having an increasingly profound impact on the real world. This involves more knowledge in economics and sociology, and requires the continued development of blockchain technology to be more reflected. It also requires experts in the sociology industry to make more analyzes and summaries.
Teacher Hong Shuning said: "Blockchain technology cannot change the world. What can change the world is the trend of decentralization based on blockchain technology. Decentralization has changed the economic and political mechanisms that have lasted for thousands of years, and has had an impact on human beings." The influence is extremely far-reaching, and can be compared with the Enlightenment in the seventeenth century. This understanding is from the perspective of economics and sociology.
Some time ago, the famous entrepreneur Zhang Ruimin was a guest with Hui and shared a knowledge point. In the I Ching Bagua, the highest state is a group of dragons without a leader. Compared with hiding a dragon but not using it, seeing a dragon in the fields, flying dragons in the sky, and overpowering a dragon with regrets, is leaderless dragons a philosophical interpretation of decentralization?
For decentralization, you can also refer to the article "The meaning of decentralization" published by Ethereum founder Vitalik Buterin in February 2017, which elaborates on the meaning of decentralization. Vitalik Buterin believes that the centralization and decentralization of computer software should be distinguished from three perspectives, namely architecture, governance and logic. Architectural centralization refers to how many nodes the system tolerates crashing and can continue to run; governance centralization refers to how many individuals or organizations are required to ultimately control the system; logical centralization refers to whether the interfaces and data presented by the system appear to be a single whole . Are architecture and logic analysis of centralization and decentralization at the natural science level? Is governance a sociological level of analysis?
2.3. Efficiency and fairness in economics
In order to better understand centralization and decentralization at the sociological level, we can understand it from some related things and service objects. For example, the issues of efficiency and fairness in economics are very similar to the role of the incentive mechanism and governance mechanism of the economic model in the blockchain. If you simply pursue efficiency, complete centralization or very centralization like DPoS is a better choice. In order to maintain other characteristics, decentralization is a better choice.
In order to better understand the combined effect of the incentive mechanism and governance mechanism of the economic model, we first understand that in real society, the two goals of maximizing economic benefits and maximizing social benefits. The balance between the two is usually achieved through a combination of initial distribution and redistribution.
An important principle that the distribution system must reflect is that it must take into account both efficiency and fairness, and it must oppose egalitarianism and prevent wide disparities in income. National income distribution is divided into two processes: primary distribution and redistribution. The primary distribution of national income based on efficiency standards may lead to an excessive gap between the rich and the poor. However, the government can control the income gap within a reasonable range and maintain social fairness through the redistribution of national income that focuses on realizing the overall interests and long-term interests of society. .
The same problem also exists in the world of blockchain. If we rely solely on the incentive mechanism of the economic model, just like the functions performed by the market mechanism, it may be easier to solve the problem of maximizing economic benefits. But pure incentive mechanisms have flaws. For example, in Bitcoin mining, if the computing power of a single mining pool is too large, a 51% attack will occur. If no intervention is done, the normal operation of the Bitcoin network will be destroyed. In addition, such as the DAO incident of Ethereum, due to system vulnerabilities, more than 3 million Ethereum assets were transferred out of the DAO asset pool. If we do not issue notices to the community and adopt relevant governance measures, these problems cannot be solved well.
Through the incentive mechanism of the economic model and related governance mechanisms, the interests of the various participants in the blockchain project and the blockchain ecosystem are guaranteed. The incentive mechanism of the economic model ensures the maximization of efficiency, and community governance, including on-chain governance and off-chain governance, is more about solving the problem of maximizing social benefits. Make trade-offs between efficiency and fairness.
3. Decentralization from the perspective of Bitcoin’s second-layer construction and Web3.0 application architecture
3.1. Bitcoin’s second-layer construction and decentralization
Here you need to quote the table in "One article summarizing the basic knowledge system of Bitcoin Layer 2 construction". In this table, you can see three different structures of Bitcoin's second-layer construction, which make various trade-offs on decentralization.
Source: Fu Shaoqing
The second-layer construction based on the chain gives up a certain degree of decentralization of Bitcoin, thereby achieving the improvement of other performance indicators. Based on the decentralized system, by increasing the implementation complexity, the decentralization of Bitcoin is ensured on the second layer, while the performance and function expansion are completed. The centralized system does not change the decentralization of the assets on Bitcoin, and only uses the statistics or auxiliary functions of the second layer to complete the auxiliary management of the first layer of Bitcoin.
3.2. Web3 application architecture and decentralization
Here you need to quote the Web3 application architecture diagram in "Observing Bitcoin Layer 2 from the Perspective of a State Machine, You Can See the Architecture and Construction Path of Future Web3 Applications".
Source: Fu Shaoqing
We will see that future Web3 applications will be a complex architecture based on blockchain systems (decentralization), decentralized systems, and centralized systems. Among them, the blockchain system and its second-layer extension complete the transmission and processing of value, and the decentralized system and the centralized system complete the transmission and processing of information. Without a decentralized blockchain system, we would still be stuck in the Web2 era. With the blockchain system, we can build more and richer applications. It’s just that the current development of blockchain is not mature enough, and this situation is not obvious enough. The application of Web3, especially the decentralized blockchain system, will greatly change our current technological and social status. The Web3 era will be a glorious era that will surpass our current imagination.
This article is reprinted with permission from: "MarsBit"
Original author: Fu Shaoqing, SatoshiLab, All Things Island BTC Studio
