One of the most important features of Nakamotoan blockchains is that they are “decentralized” . Blockchains and consensus protocols are grievously inefficient, but the price is considered worth paying in order to eliminate the potential for a few privileged actors to control the network.
Nakamoto-style blockchains are theoretically decentralized. This means that the system is capable of, and intended to be, run by a non-hierarchical group of peers. But real networks are never perfectly decentralized in practice. There are also many possible dimensions of “decentralization”.
One important, if not preeminent dimension is decision making: just how are decisions actually made, and by whom?
Researchers from University College London report this spring that in fact the decision making is concerned Bitcoin and Ethereum are highly centralized . This finding confirms the intuition of anyone who has dealt with these communities. Regardless of philosophical intentions, there are a relative handful of people and organizations that have out-sized influence on these cryptocurrencies.
The study examined the public discussion and code repositories, where the design and implementation of the software infrastructure is recorded. This infrastructure embodies many technical decisions that affect the behavior of the system, the outcomes of users, the security and trustworthiness of the information, and even how decisions are made.
The decision-making process is modelled after the Internet and open source software. Ideas are formulated as public proposals, which are posted for global discussion. Implementations are published in open repositories, and also subject to evaluation and discussion. The principle is that anyone on the Internet can propose features or changes, and that implementations will have widespread understanding and support by the time they are deployed.
The study examines the number of individuals who contribute to comments and code for different cryptocurrencies, as well as comparison to other open source code projects.
The results are pretty simple.
While “anyone on the Internet” is theoretically able to contribute, only a relatively small number of people actually write the code. And most files have only a handful of authors. (Programmers will not be surprised at this: coding is hard work, and collaborative coding is even harder.)
Similarly, the open-to-anyone comment process is, in practice, dominated by a handful of individuals, who are de facto “experts”. This distribution parallels the pattern of actual coding, though whether “coders are experts” or “experts are coders” or there are two separate populations is not clear.
This study confirms what we have seen in practice: cryptocurrency communities are complicated, with many individuals, organizations, and interest blocs that exercise outsized influence. Their comparison to other code projects indicates that these are a natural pattern for “distributed” software projects. The paper also include references to other studies that show just how “centralized” cryptocurrencies are.
The study did not, and could not, compare to non-decentralized projects, such as proprietary or sponsored systems. My own experience is that such projects have similar patterns of concentration in decision making (a relative few highly influential designers and coders), though this case there is also a formal proprietor with decision-making authority which may override the contributors.
In other words, the pattern seen in this study is perfectly normal for software development. The major difference is that there is no one “in charge”, so the de facto mavens rule.
It is important to note that, as the researchers discuss, there is a large ecosystem beyond the core software examined here. These other projects, including exchanges, wallets, and services are organized in a variety of ways, some “decentralized”, and some very centralized (and opaque). This means that the overall, end-to-end system is “patchy” and likely includes many islands of code, created and managed by different people. It isn’t really reasonable to describe a cryptocurrency as purely “decentralized”.
This and many other studies show that the broad and often poorly defined notion that cryptocurrencies are “decentralized” is not realized in the actual, real-world implementation. Clearly, the Nakamotoan dream of a truly decentralized system has yet to be realized in practice.
This conclusion is important because this “decentralization” property underlies other important claims for the ultimate fairness and usefulness of the system. For many people, the point of paying the high technical cost for decentralization is to achieve a system that is not, and cannot be, controlled by a powerful few. If this goal is not really being accomplished, then the case for Nakamotoan blockchains is much weaker.
- Sarah Azouvi, Mary Maller, and Sarah Meiklejohn, Egalitarian Society or Benevolent Dictatorship: The State of Cryptocurrency Governance. 2018. https://fc18.ifca.ai/bitcoin/papers/bitcoin18-final13.pdf
- Alyssa Hertig (2018) Major Blockchains Are Pretty Much Still Centralized, Research Finds. Coindesk, https://www.coindesk.com/major-blockchains-pretty-much-still-centralized-research-finds/
- Satoshi Nakamoto, Bitcoin: A Peer-to-Peer Electronic Cash System. 2009. http://bitcoin.org/bitcoin.pdf