ChinaLedger Bai Shuo: Decentralization is not the essential feature of blockchain

Recently, I have been in contact with people from all walks of life who want to understand blockchain, and I found that the information they get about blockchain is very mixed: some are wrong, such as blockchain is not safe, and some blockchain trading platform has absconded with donations or been hacked. In fact, this is an off-chain matter, and the hat of insecurity cannot be pinned on the blockchain. Some are outdated, and it is no longer the case now. For example, the computing power of blockchain is evenly distributed around the world, but in fact more than half of the computing power is concentrated in China. Some are one-sided, such as the slow transaction speed. In fact, only some private digital currency public chain platforms including Bitcoin are like this, and they do so due to a variety of factors, not because they can only do this technically. Some are premised, such as the transaction speed per second reaches tens of thousands or hundreds of thousands of transactions. These statements are based on what test data, what network, and what security requirements, and the conclusions drawn under different premises are very different. Some are contradictory, such as some say that privacy is good and some say that transparency is good. In fact, good privacy refers to account anonymity, and good transparency refers to account disclosure. One is aimed at accounts and the other is aimed at accounts, which are completely unrelated. To use an irreverent analogy to describe the masters, blockchain is like the linguistics master Chomsky. You have worked so hard to understand one of his theories, and just when you were about to criticize him, he denies himself first and enters a higher realm that you cannot even grasp.

However, the most misleading and almost unanimous view is that these people generally believe that blockchain is "decentralized". This view is full of prejudice and confusion, which is very harmful to the correct understanding, popularization and long-term planning of blockchain. I would like to focus on this issue and do some explanation work to clarify the source.

The first point to be made clear is that "blockchain" is a very general concept, and it is actually difficult to put a hat on this general concept. For the sake of clarity, we need to understand that there are actually two groups of people in the blockchain industry. One group is called the "币圈". For them, blockchain is a trinity of platform + digital currency + community. None of them can be missing. Any innovation and application must run with the platform, digital currency and community. This trinity is their base and lifeblood. This trinity not only has technology, but also business and ideas. Another group of people is called the "链圈". For them, blockchain is a technical system and a platform. The digital currency and community in it can be removed, and it doesn't matter even if they are replaced with something else. For the six major blockchain technology systems in the world today (Bitcoin, Ripple, BitShares, Ethereum, Hyperledger, Corda), the first four are the trinity of the coin circle, and the last two are pure technical platforms of the chain circle. Therefore, if someone says that Ethereum is slow, what they actually mean is that the public chain platform that runs Ethereum and is jointly maintained and managed by the community of Ethereum holders is slow, and that platform is not necessarily slow, it is just "forced" to be slow in the context of the trinity. If someone says that Ethereum is decentralized, what they actually mean is that the business of the Ethereum community, led by the core concept of the Ethereum community and supported by the Ethereum public chain platform, is decentralized, and the Ethereum technology system itself is not incapable of introducing centralized elements.

Then I want to say that the blockchain is actually layered in terms of architecture. In the Bitcoin system, smart contracts are not very developed. In Ethereum and Hyperledger, smart contracts are already very developed, and smart contracts and basic ledgers are clearly divided into two different levels. If the basic ledger has many technical settings that reflect the concept of decentralization, such as the value of an account, which is completely controlled by the person who owns the private key corresponding to the account, and the account content under this technical system, which is completely determined by each node according to the preset consensus mechanism, no "super" account can dispose of the value of others. If the contract is wrong, it must be corrected first. If the party who has benefited does not take the initiative to spit it out, no "super" account has the authority to change it to "right". If many people in the community cannot stand the mistake, they must be changed through forks. Especially hard forks, as long as someone insists on making a mistake, it will inevitably lead to the division of the community.

This decentralization, which is solidified by the trinity of the "cryptocurrency circle", is no longer just a concept, but a business system arrangement that is deeply coupled with the technology at the basic ledger level. Therefore, it is almost impossible to introduce centralized elements in the cryptocurrency circle: the community strongly opposes, the business has been solidified, and the technology has deep path dependence. For such a setting, it is not impossible to break through technically, but it will inevitably shake the foundation of the cryptocurrency circle.

The "chain circle" does not have such a burden. Not only does it not have a burden, the "chain circle" has a more positive attitude towards the introduction of centralized elements into the blockchain technology system. Because if it is technically proven that the introduction of centralized elements is feasible, and after the introduction of centralized elements, blockchain technology will enter the main financial battlefield with fewer legal and compliance obstacles, and regulators will have fewer concerns about the protection of financial consumer rights and interests and systemic and global risks, which will be conducive to blockchain technology entering the main financial battlefield and giving full play to its technical advantages.

Taking the capital market as an example, in summary, the implementation of the following institutional arrangements may require the introduction of centralized elements.

——In judicial terms, freezing assets in specific accounts requires centralized privileges.

——In terms of administrative supervision, there is the privilege of conducting real-name and transparent management of account information in accordance with the law.

——In terms of self-regulation, exchanges have the privilege to suspend trading of specific products, suspend trading of specific markets, cancel transactions that are manifestly unfair, and force liquidation and reduction of leveraged product positions that meet risk control trigger conditions under certain circumstances.

——Under certain circumstances, the registered custodian institution has the privilege to suspend or refuse delivery of transactions that have already been concluded in accordance with the law.

All these privileges have centralized attributes. They all involve the privilege of disposing of assets under the name of others in a technical sense as law enforcers, regulators, and self-regulators. The examples we have cited are limited to the situation in the capital market. I believe that banks and insurance companies are likely to have similar institutional arrangements with centralized attributes. It can be said that if these privileges cannot be supported technically, blockchain technology will not be successfully implemented in the "main battlefield" of finance.

If we follow the development logic of the "chain circle", it is imperative to introduce a privilege mechanism with a centralized color, then what is the way to introduce these centralized elements? The answer is nothing more than two: one is to introduce it at the level of the basic ledger, and the other is to introduce it at the level of the smart contract.

If it is introduced at the basic ledger level, whether it is starting from scratch or borrowing a mature platform in the cryptocurrency circle as the basis, it is feasible in principle, but there is also a major risk that the strong security at the basic ledger level may be challenged. We need more development, testing, demonstration and deduction work, and we also need all-round technical support from the basic ledger level. Especially in the case of borrowing a cryptocurrency platform as the basis, every time the basic ledger version changes, there is a choice between compatibility follow-up or permanent fork.

If it is introduced at the smart contract level, there will be greater flexibility in technology selection. If the work at the smart contract level is done well, even the basic ledger can be pluggable. For small-scale and small-scale revisions at the basic ledger level, the smart contract level may not even need to be revised to adapt. There are only two issues that need to be studied in depth. One is how to prevent the abuse and misappropriation of centralized elements and centralized functions from a technical perspective at the smart contract level, and the other is whether the security guarantee provided by the smart contract itself is strong enough. It is certain that the smart contract as a whole meets the value conservation constraint. Improper exercise of privileges will not immediately result in the disposal of the value being removed from the smart contract. Therefore, as long as there is an opportunity to "put on the brakes" on the smart contract, the consequences of improper exercise of privileges will also have the opportunity to be corrected in time and will not spread to the basic ledger level.

In short, decentralization is neither the essential attribute nor the inevitable inference of blockchain in theory or practice. Introducing centralized elements into blockchain from a positive perspective is of great significance for promoting the implementation of blockchain technology in the main financial battlefield.