Limitations to Decentralisation

How far are we and how far can we go?

Oracle Data

Blockchains depend on oracles to receive information about the external world. Oracles are data sources like websites, books, measurement devices, sports scores, etc. Most of the information we consume daily has been provided by a central entity like a newspaper, TV channel, book author, or published article. On a daily basis, we must make our own determination as to what sources we define as credible and trustworthy. To do this, we take into account the author’s background, the sources on which the information is based, or in general, our relationship with that source.

Alice receives the data on the match, whereby she adopts the majority opinion
Alice and Bob provide varying information to the dispute resolution committee. The outcome of the dispute is unclear

Governance

Governance can be defined as the principles behind decision making to manage common incentives. I am going to make the controversial claim that no blockchain is completely decentralised if it relies on off chain decision making or a hybrid approach between off chain and on chain decision making.

The downside of on chain democracy

Currently, dPoS is probably the closest to an on chain democracy. It allows nodes to stake on other nodes and the nodes with the most stake to make network decisions. dPoS allows nodes to receive a large amount of stake. There is no way one individual node can vote out one of the delegated nodes (Scenario 1). However, if I do not like the decisions taken by my local government, then I can start a partition and try to sort things out in my favour. On chain governance does not allow for these kinds of actions.

Scenario 1. Candidate #1 receives all the stake of ‘passive’ voters. Candidate #2 has no chance of competing with candidate #1
Scenario 2. Each candidate has to stake on themselves. Now, candidate #2 has a similar chance to candidate #1

Social

If on chain governance should be avoided in the first place because of various reasons, then certain limitations to decentralisation might be unavoidable and at the same time may not matter to the users in the system. This does not hold true for all situations. There are specific scenarios in which users probably do not mind who is making the decisions, while there are other scenarios in which transparent and tamper-proof decision making is crucial. Imagine your landlord can change your contract whenever (s)he feels like it. This would probably affect you on a financial and emotional level (stress). Therefore, it is important to you that any decision taken is discussed beforehand and within pre-agreed frameworks e.g. laws and contracts. In comparison, it does not matter to you who is serving your coffee, as long as you receive the coffee after you have paid for it.

Why should you care?

Blockchains have to prioritise between decentralisation, security and scalability. While optimisations can be made through the implementation of different designs, decentralisation has fundamental limitations for which we have yet to find proper solutions.

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