What does blockchain “decentralization” actually mean?

Text/Chang Jian

In the past few years, the biggest misunderstanding of blockchain may be the understanding of the word "decentralization". According to the literal meaning, decentralization means the dispersion of nodes, data, miners, and developers... Some people even believe that the dispersion of miners (everyone can use personal computers to mine) is the original intention of Satoshi Nakamoto. Satoshi Nakamoto supports "one CPU one vote", that is, each user can mine through personal computers and mobile phones. Others have tried to resist the development of ASIC chips and avoid the centralization of computing power through algorithm improvements. Of course, these efforts are just a cover-up. Algorithms can only delay the birth of specialized mining chips, not prevent them.

It should be pointed out that "everyone can use personal computers to mine" is exactly the "one IP one vote system" that Satoshi Nakamoto opposed. This is because each miner's computer contributes to a full node, which is equivalent to all IPs of the network node having equal power. Then, those who have the power to allocate a large number of IP addresses, such as botnets, may dominate the Bitcoin network. A botnet can contain up to hundreds of thousands of machines. For example, Baofeng Trojan has 250,000 nodes, which is far more than the number of nodes in the entire Bitcoin network (6,000 to 8,000). The botnet controlled by Baofeng Trojan can easily launch a 51% attack. Satoshi Nakamoto's "one CPU one vote" actually means that a computing unit represents a power unit. Having higher computing power means higher power. This is a figurative expression of the idea of ​​"computation is power" in proof of work.

Everyone can mine with their own personal computers and mobile phones. This seems to be a fairer and more decentralized ideal society. But why is the security of blockchain reduced? The reason is simple. Decentralization is not a word that describes a state, but a word that describes a process. The decentralization of the state does not mean the decentralization of the process. The nodes of the botnet are decentralized in state, but highly consistent in behavior patterns. The original meaning of decentralization refers to the freedom of everyone to participate in consensus. He has the right to participate, and he also has the right to withdraw. Under the premise of open source code and information symmetry, the freedom of participation and decision-making means fairness.

We can understand decentralization from the perspective of asset allocation, which also has the need to diversify risks and assets. Hundreds of years ago, Antonio in Shakespeare's The Merchant of Venice said: "The success or failure of my business does not depend entirely on a ship, nor on a place; my entire property will not be affected by the profit or loss of a year." This is what people often call the "don't put all your eggs in one basket" strategy.

However, if the assets in the basket are correlated, then no matter how diversified the asset allocation is, it cannot play a role in diversifying risks. If a market is in a downward channel as a whole, and most of the assets in the market are correlated, the more diversified your asset allocation is, the more stable the asset loss will be. At this time, it is better to bet everything like a gambler and allocate all funds to an asset that is not correlated or has an anti-correlation with most assets.

If the correlation between these assets is unknown, then according to the maximum entropy principle (Note 1), it should be assumed that these assets have the maximum randomness. For blockchain, it should be assumed that these nodes have absolute freedom to make decisions, and developers or a group of people should not be given higher power, or be trusted or entrusted to keep accounts. As pointed out in the Princeton Bitcoin Open Course: "Bitcoin's consensus algorithm relies heavily on randomization. It abandons the specific start and end time for consensus to occur. Instead, as time goes by, the probability that certain blocks you think will be consensused will become higher and higher, and the probability of differences of opinion will decrease exponentially. The difference in these models is the key to Bitcoin's ability to bypass the impossible results of traditional distributed consensus algorithms."

It may seem more decentralized if everyone can use their personal computers to mine, but in fact, if these personal computers are infected with a zombie virus, the correlation between their behaviors will be 1. No matter how large the number of these nodes is, they will be considered the same node. For example, although the Bitfinex exchange uses multi-signatures, the private key kept by Bitgo automatically signs all requests from the Bitfinex server, so the two private keys are actually equivalent to only one private key. No matter how many private keys are used for multi-signatures, no matter how decentralized the custody of these private keys is, as long as the behavior patterns of these private keys are consistent, then this multi-signature scheme is unsafe.

On the contrary, under the mining incentive mechanism, although the computing power is centralized on the surface (it is actually decentralized, but a few people have much more computing power than others), no one can stop you from participating in mining and developing mining machines. This is a completely decentralized process of free competition. This is like voting in an election. Although the democratic system where everyone has a vote can also elect Bush Jr., it seems that it is a family "hereditary" system, but the election process is decentralized, so these elections are legal.

It can be seen that decentralization is not a new word. It is actually the invisible hand of Adam Smith: free competition in the market. Under the competition mechanism, the concentration of computing power is not a terrible problem. On the one hand, due to the high cost of computing power, the 51% attack launched by mining pools and miners does not conform to the premise of rational economic man; on the other hand, even if there are unreasonable lunatics, such as mining pools with a large share of computing power, their attacks are unsustainable, because the computing power of the mining pools does not really belong to them, and they are always facing challenges from new computing power and new players. The concentration of computing power itself is the result of the market. Any open system will form a specialized division of labor under free competition, which is like the organizational differentiation of biological organisms. Professional miners, professional payment wallets, professional blockchain data service providers... This is the result of blockchain decentralization, not the consequence we are trying to avoid.

Note 1: The maximum entropy principle was proposed by ET Jaynes in 1957. The main idea is that when only partial knowledge about the unknown distribution is known, the probability distribution that conforms to this knowledge but has the largest entropy value should be selected.