Problems with decentralization

At the bottom of blockchain’s ideology there is a network, which solves one fundamental problem – the ability to store and exchange different kinds of data and information without a need of central authority or intermediaries. Blockchain achieves this by using cryptography and other complex algorithms, which allow us to operate safely on a trusted network even though we don’t trust each other.

The key concept here is the network’s decentralization. Blockchain’s network is created from many devices known as nodes that are connected together. These nodes keep track of all the past information and verify all the new information added to the network. On blockchain each node is equal and decisions about which information is correct are made by all nodes together, which means that blockchain is supposed to be able to achieve full decentralization.

However, Richard Haverinen, founder and CEO of Libonomy, is highlighting that there are some not so obvious, but very serious concerns with the models we have been using thus far. He explains the issues and presents how Libonomy is going to help the world to sustain a completely decentralized network.

“To understand why there is a need for decentralization, we first need to understand what the problems of centralized structures are. Freedom of speech and choice are often taken for granted, but the more information we share and the more tools we use from centralized institutions, the more power we give to them.

Social media platforms can use our personal information in marketing campaigns, banks hold our funds and can decide the rules on how we can spend our money, news outlets can control the information that we receive, stores force us to trust them with the origins of products, and governments have full control over our personal identity documents. The list is endless, we use centralized services every day – network providers can disable internet connection, server hosting companies can close down their services.

Fully decentralized systems let us be in control of our information and data. Instead of needing to trust a central authority with security and usability, we can put the trust in preset rules and conditions. With decentralized systems there is also transparency – information can not only be accessed at all times, but also its validity can be checked by everyone.”

There is a clear indication why in the information age we would benefit by moving away from centralized to decentralized systems, but decentralized systems are only as good as the preset rules for them. Richard Haverinen explains that some projects have a misleading perception of decentralization, and their users might completely miss it.

“Problem right now isn’t just with known centralized services, there are also issues with most of the blockchains at the moment as well. That’s not because they are not decentralized, but because they are not decentralized enough.

Some blockchains are more decentralized than others, some are not decentralized at all

As we see, even though we are talking about blockchain, we can’t automatically assume that it follows a full set of rules that blockchain is perceived with. Creating new businesses and optimizing services is great, but the heart of blockchain lies with the decentralization.

“There can be many factors and reasons for not enough decentralization, but there are three that stand out the most. First, characteristics of the blockchain are chosen to improve performance while sacrificing other traits

Second, it is quite troublesome to become a miner or validator that is why there are not enough of them. The reasons can be various – a lack of knowledge, not enough resources or the contribution reward is too small.. Proof of Work blockchains require miners, which solve mathematical problems to earn rewards. In this process specific devices are required which use a lot of energy, are very loud, are hard to move around and require specific knowledge to set them up. On the other side of the spectrum, Proof of Stake blockchains are energy efficient and convenient, but in order to become a validor, significant initial investments and, in many cases, a long-term commitment to lock up the assets is required.

Third, if we forget about the heavy burden that is the requirement of a significant investment as well as the convoluted process of becoming a miner or validator, we can’t ignore the inadequate reward systems which incentivize nodes to cooperate in groups, known as mining or staking pools, in order to increase the chance for a reward on POW systems, or be eligible for it on POS systems.”

Ethereum 2.0 official requirement for staking is 32 ETH, which is about 60 000 USD. That is a significant amount and not everyone can afford it, thus many people can’t become validators. There is an option to come together and form staking pools, but then again we are moving away from decentralization. Besides the large sum that is required, there are risks involved, by going offline or failing to validate, you risk losing your staked ETH. So, staking requires a large initial investment, it’s not risk-free, and in some cases you might have to lock your ETH for a significant period of time.

Richard Haverinen and the Libonomy team are presenting a new blockchain that utilizes artificial intelligence with redesigned architecture to not necessarily require a large investment or a specific knowledge to become a validator, and there would be no risk involved.

“Libonomy is an improved version of blockchain. We can provide the world with a network which is much faster than any other, which doesn’t sacrifice security, decentralization or any other key aspects of blockchain technology, but instead add more features, add more security, add more tools and possibilities.

Becoming a part of Libonomy blockchain is as simple as installing a software on any device, even a mobile phone, there is no risk, everyone can join and leave as they please, it doesn’t require a large initial investment, and network verifiers are rewarded more honestly based on their contribution to the network. In this way even mobile devices and other low-computational power devices are rewarded fairly and are not incentivized to form pools.”

When we’re talking about trusting someone, we don’t necessarily mean that we don’t trust a person or a company. Our doubts lie with concerns about them taking a personal benefit due to having our information, or them not being ready to protect our information from attacks. We also might fear that we wouldn’t be able to access our information at a time when we need it, or that we could be controlled because of the given power to these entities. Whatever is the reason, as we move on in the information age decentralized systems allow us to put our trust in technology and ourselves instead of companies, governments or other people.