Why decentralization matters (according to Vitalik Buterin) | RP 96

Business, Media & Technology

1 — What is decentralization?

This is how I understood decentralization: that not all the processing for a system is done from one place.

From its beginnings, Bitcoin and blockchain were designed to decentralize the transfer of money. No more intermediaries or trusted third parties.

But how the network decentralizes is up for debate.

The clearest definition I found is from Ethereum founder Vitalik Buterin. He identifies three sub-dimensions to the definition of decentralization:

1. Architectural — How many physical computers make up the system?

2. Political — How many individuals or organizations control the computers?

3. Logical — Does the system operate as a single entity as a swarm of computers?

In principle, blockchains are politically and architecturally decentralized, but logically centralized.

Here’s a couple of examples:

• In the Bitcoin blockchain, a relatively small number of mining companies power most of the network (politically decentralized). Each company controls a number of mining rigs (architecturally decentralized), but all nodes in the network are working towards a single goal: mining more BTC (logically centralized).

• In a crypto organization like a DAO, tokenholders hold the voting power (architecturally decentralized). The more tokens an individual has, the more voting power they possess. If a small number of tokenholders possess a majority of tokens, the DAO is more politically centralized than one whose tokens are distributed evenly amongst a large number of tokenholders. Like Bitocoin miners, members share a belief or vision of the future that they are all working towards (logically centralized).

Broken down like that, decentralization becomes a lot easier to talk about. But why does decentralization matter anyway? Keep reading.

Business, Media & Technology

2 – Decentralization’s strengths & weaknesses (according to Vitalik Buterin)

Now that we have a working understanding of what decentralization is, it’s time to talk about the impact it can make.

Here are 3 arguments for decentralized projects, their weaknesses, and the way to strengthen them:

Fault tolerance: “My plan B has a plan B”

The decentralization argument: In principle, it’s less likely for 20 computers in a network to fail at the same time than it is for one to fail.

The weakness: Thanks to the possibility of common mode failure — that a system will experience a widespread failure because of one common underlying reason — the argument above might not hold up in practice. Here’s how:

• Yes, a crypto network might have many nodes. But Vitalik argues, what if…

  • “In a proof of stake blockchain, 70% of the coins at stake are held in one exchange?”

  • “The research team that is proposing protocol upgrades turns out to be socially corrupted?”

  • “In a proof of work blockchain, 70% of miners are in the same country, and the government of this country decides to seize all mining farms for national security purposes?”

The way forward: Network members must obsess over rooting out centralization at each sub-dimension in the network. This includes:

• Democratizing access to the underlying code/protocols

• Varying where the core developers and researchers are located or hold employment

• What consensus mechanisms the network uses (ex. proof of stake with coins vs proof of work with hardware)

Once identified, networks may choose to keep certain parts of the system more centralized than others, but this must be a conscious decision and not a blind spot.

Attack resistance: “Multiple targets make attack harder”

The decentralization argument: In principle, it’s easier to take over one computer, than it is to successfully overwhelm 20.

The weakness: In practice, the tragedy of the commons comes into play. Private companies are commercially incentivized to pour millions of dollars into their systems’ security.

This means it might actually be cheaper and easier to attack 20 unprotected home computers, than it is to successfully take over a single enterprise web server.

• Vitalik: “In general, the modern world is in many cases characterized by an attack/defense asymmetry in favor of the attacker — a building that costs $10 million to build may cost less than $100,000 to destroy, but the attacker’s leverage is often sublinear: if a building that costs $10 million to build costs $100,000 to destroy, a building that costs $1 million to build may realistically cost perhaps $30,000 to destroy. Smaller gives better ratios.”

The way forward: Emphasize political, as much as architectural decentralization. In other words, distribute power through individuals, not computing power.

Vitalik sees this as an argument for proof of stake (PoS) over proof of work (PoW). In PoS, decentralization is achieved through coins (which are easier to hide and harder to attack), than computer hardware.

Collusion resistance: “Encourage and discourage coordination, at the same time”

The decentralization argument: Decentralization discourages undesired coordination, thus protecting the network.

The weakness: This is a paradox. On one hand, decentralization gives us a way to prevent undesired coordination that only enrich the collaborators at the expense of less coordinated individuals (ex. monopolies).

At the same time, zero coordination equals zero innovation. We want to encourage coordination that have the network’s best interests in mind (ex. a community fighting a denial-of-service attack together).

The way forward: Rely on both the protocol and users to figure out the right balance.

It is difficult to cover all the bases of collusion with engineering alone. Neither is it enough to put down community rules to prevent collusion.

Building a system to resist undesired coordination while encouraging desired coordination needs both the social and engineering sides of a network to work together.

Elective

3 — 5 lessons: How the Wright Brothers beat wealthy rivals, overcame public skepticism & won the race to the sky

I’m a third generation entrepreneur.

• My maternal grandmother sold watermelons to put my mom through school.

• My paternal grandfather was a wealthy cotton businessman, well-known around our little town in rural China.

• My parents started and continue to operate a trading company.

… So I have a soft spot for family businesses.

Today we’re taking notes from another family outfit: the Wright brothers.

Orville and Wilbur Wright don’t need an introduction.

On December 17 1903, the brothers overcame a lack of funding, competitors with influential backers, and public skepticism to put the first aircraft into the sky. And went on to profit handsomely from their innovation.

By the time Orville died in 1948, he had been an active public figure from the age of horse-drawn buggy to the beginnings of supersonic flight.

And they did this without any formal schooling.

How?

Lesson 1: Keep it simple

Unlike their government-backed rival from the Smithsonian, Samuel Langley, the Wrights couldn’t afford fancy equipment or a large team.

They had no outside funding or grants.

They didn’t have a lot of manpower, either.

So they did everything themselves.

For starters, they divided up the problem of flight into three parts: control, wings, and engines. Unlike other inventors, they left the engine last; they felt that the proliferation of steam engines would make this part easy. They spent most of 3 years observing birds, understanding the science of flight, and learning the fundamentals of gliding.

Throughout this, all they had were pen and paper… and lots of wood, fabric, and metal wires for their hang-glider prototypes.

With these basic tools, they took their time, worked simply and systematically and patiently iterated on each prototype.

Lesson 2: Just-in-time > Just-in-case

Unlike the innovators behind the steam engine, the Wrights weren’t engineers. They were bike mechanics.

Still they used what they knew about fixing bicycles and diligent craftsmanship to build a deep understanding of aeronautics and the requirements for flight.

Fortunately, as they were in the final stages of designing the propeller and cracking the mathematics of flight, they had a lucky break: Charles Taylor, the man they hired to run the bike shop knew how to build engines. Taylor went on to build a lightweight aluminum engine that the brothers used for the flight in Kitty Hawk.

They didn’t get an MBA, take a course, or read a book. The Wrights began before they were ready… And were ready for serendipity when it came knocking.

Lesson 3: Balance deep work with distribution

What most people don’t know is that the brothers were not immediate celebrities after the first flight in Kitty Hawk. The media and the public continued to ignore them even after Wilbur set a record two years later for twenty-four miles of flight.

Still, over the next few years, the brothers found ways to promote their aircraft and steadily overcome the public’s skepticism.

In 1908, for example, they did two demonstrations — Wilbur in Le Mans, France and Orville in Fort Myer, Washington. Orville flew around the track for two minutes. Wilbur flew for over an hour — twice.

This finally got the public’s attention and enthusiasm. From then on, the brothers were celebrities and the race to dominate the skies was on.

The Wright brothers were savvy enough not to build and wait for people to pay attention; they believed in the strength of their invention and their patented ideas and did whatever it took to get mass adoption.

Lesson 4: Keep the day job

Between 1900 and the breakthrough flight on 1903, the Wright brothers spent most of the year in their bike repair store and spent the slow season on their dream of aviation.

Thanks to the bike repair store they opened in 1892, they had a way to independently fund their interest in flight.

The Wrights didn’t quit their day job to pursue their passion of aerodynamics and engineering. They did their work on the side… Until the rest of the world caught up with their vision of the aeronautic industry.

Lesson 5: Build on what others know

Deep work demands solitude. It is about thinking, experimenting, analyzing in solitude.

Shallow work precludes collaboration. It is about responding to emails, reaching out for meetings, and organizing information.

The brothers did both.

The brothers relied heavily on the research and the work of aviation pioneers, like Leonardo da Vinci, Octave Chanute, and Otto Lillienthal to do their work.

They balanced the solitude needed to experiment with gliders, propellers, and flying machines, with the collaboration with others required to achieve powered flight.

They didn’t try to build everything from scratch. They were innovators who knew that they could win the Sky Race, only if they swallowed their pride and stood on the shoulders of those who came before them.

😉 You're welcome

A selection of interesting links & fun recommendations.

• ▶️ How Dan Koe made $800k in one year writing online. Dan Koe is a creator and brand advisor for influencers. I began following him because I liked how he teaches online business. If you like this video on his journey, you’ll enjoy the rest of his One Person Business Series playlist. (There is a podcast version of this clip, too.)

• 📸 “None of the decisions I made led me to fame or wealth, but they have led to really rich relationships.” A father talks to Humans of New York about how he always prioritized being with his wife and kids, over his work and making money.
  Today, he has an amazing relationship and is friends with his adult children.

  In the short term and to outsiders, his life looks like one continuous sacrifice. But in hindsight and to the people that matter to him, I bet it was a no-brainer.

• 🛠️ Pakt Travel Backpack (34L). Pakt didn’t pay me to say this. But if I only had 15 minutes to pack, to go someplace I’ve never been to, this is the bag I would use.

  This backpack features a luggage-like clamshell with dual main compartments, an integrated fanny pack (that has saved my forgetful self on many trips), and a middle padded laptop compartment that fits my 14” Macbook Pro.

  I own a number of bags, and this is by far my go-to backpack when I’m travelling and working.

  (Pakt will be coming out with a new version of the bag with a more weatherproof construction. So if you’re worried about the price tag, you can get the current designs for less.)