If there is one word that gets thrown around a lot in crypto discourse, it is “decentralization.”
It was in the second line
that Satoshi Nakamoto used to introduce bitcoin in his p2pfoundation post. We even hosted a conference
earlier this year in Singapore around the theme.
Decentralization is arguably the most important tenet on which public blockchains are built. Distributing power to multiple nodes, as opposed to having a single centralized authority making decisions, makes the network more censorship-resistant and by extension more trustworthy.
Decentralization, combined with the austere relentlessness of cryptography, enables trustless, distributed computing and this is at the heart of the design of a blockchain.
Every blockchain project goes to great lengths to talk about how decentralized they are as compared to their rivals, although, they are rarely ever transparent about the exact level of decentralization. One reason why many people use the term ‘decentralization’ loosely is because we do not have a universal definition of what decentralization means or have an accurate metric to quantify it. First and foremost, decentralization is a relative metric and absolute decentralization can never be achieved. True decentralization almost always implies that there is a compromise to be made on at least one of the two orthogonal attributes, either scalability or governance. We have explored this to some length in two previous posts here
Decentralization has many definitions. At least in the context of public blockchains, it can mean the distribution of wealth, it can refer to a diversity in consensus determination, or it can refer to distributed decision making in pushing code updates to the protocol. There have also been some attempts to apply traditional economic measures such as Lorenz curves and Gini coefficients, to the various subsystems that make up a blockchain, such as mining, client codebase, developer volumes, ownership concentration in addresses, geographical distribution of nodes and volume across exchanges.
Below we compare how each of the top 10 protocols fare on the various aspects that denote decentralization.
Figure 1: # of Entities in Control of >50% of mining/staking power