From: Matt Corallo Date: Thu, 14 Jan 2016 19:57:35 +0000 (-0800) Subject: Split second P X-Git-Url: http://git.bitcoin.ninja/index.cgi?a=commitdiff_plain;h=4e8a816f1e7dd131eb1e8cb2a8403c5ef642ba1d;p=blog Split second P --- diff --git a/_posts/2015-01-14-decentralization.md b/_posts/2015-01-14-decentralization.md index b77c578..dcff5ae 100644 --- a/_posts/2015-01-14-decentralization.md +++ b/_posts/2015-01-14-decentralization.md @@ -5,7 +5,9 @@ title: The Role of Decentralization in Bitcoin Bitcoiners, from Bitcoin Core developers to long-time Bitcoin enthusiasts to recent /r/Bitcoin discoverers, love to talk about how Bitcoin's decentralization is its ultimate feature. Rarely, however, do you see anyone explain why decentralization matters - surely it's an interesting property from a computer science perspective, but why should consumers, businesses or investors care? This post is an attempt to write out why decentralization is foundational to Bitcoin's utility and, somewhat more importantly, set up future posts talking about when it isn't. -When Bitcoiners talk about decentralization, the first thing that comes up is Bitcoin's oft-touted lack of inherent third-party trust. While well-placed trust is a requirement for many systems to operate efficiently, when trust has been misplaced systems can become incredibly fragile. Take, for example, trust in US banks before the establishment of the FDIC. While access to banking services allowed for more convenience and allowed many companies to operate more efficiently, banks were known to collapse, taking all customer funds with them. While certainly not a big deal for most consumers in the western world today, transactions in much of the world pass through banks that are only marginally trustworthy, at best. Even given the state of consumer protections in the west, individuals are not universally protected from loss across borders and over certain value. Worse, regulations which allow individual government officials to seize assets unilaterally have become common. Especially in the US, the now infamous Operation Choke Point and civil asset forfeiture programs have allowed law enforcement officials and private institutions to seize financial assets and deny financial services with little to no oversight. Thus, removing trusted custodians and creating a system with liquid, unseizable assets has the potential to provide more reliable financial services to many who might otherwise not be able to operate efficiently, or at all. This unseizability of Bitcoin is made possible only through its lack of a centralized trust requirement. While centralized e-cash and financial systems have tried to provide such reliability, regulations and business realities have nearly universally prevented it. +When Bitcoiners talk about decentralization, the first thing that comes up is Bitcoin's oft-touted lack of inherent third-party trust. While well-placed trust is a requirement for many systems to operate efficiently, when trust has been misplaced systems can become incredibly fragile. Take, for example, trust in US banks before the establishment of the FDIC. While access to banking services allowed for more convenience and allowed many companies to operate more efficiently, banks were known to collapse, taking all customer funds with them. While the introduction of the FDIC and similar programs decentralized trust in financial institutions from one party to two, transactions in much of the world do not offer such protections. Even with such programs, individuals are not universally protected from loss across borders and over certain value. + +More recently, regulations which allow individual government officials to seize assets unilaterally have become common. Especially in the US, the now infamous Operation Choke Point and civil asset forfeiture programs have allowed law enforcement officials and private institutions to seize financial assets and deny financial services with little to no oversight. Thus, removing trusted custodians and creating a system with liquid, unseizable assets has the potential to provide more reliable financial services to many who might otherwise not be able to operate efficiently, or at all. This unseizability of Bitcoin is made possible only through its lack of a centralized trust requirement. While centralized e-cash and financial systems have tried to provide such reliability, regulations and business realities have nearly universally prevented it. A highly-related property that is equally important to the ability of Bitcoin to provide financial services to whistleblowers, foreign dissidents and porn stars is its transaction censorship resistance. While the ability of third parties to seize assets results in direct and clear monetary loss, freezing assets can have a similar effect. When an individual or organization is no longer able to make transactions to use their assets to pay for goods and services, their financial assets quickly lose their value. While Bitcoin has a very solid unsizeability story (namely that every party in the system enforces the inability of anyone to spend Bitcoin without the associated private key), its censorship resistance story is a bit more nuanced. In a world where no Bitcoin miners have more than 1% of total hash power (or something else equivalently decentralized), it should be easy to find a miner which is either anonymous and accepting all transactions or in a jurisdiction which is not attempting to censor your transactions. Of course this isn't the world we have today, and transaction censorship is one of the bigger reasons to be seriously concerned with mining centralization (for full nodes). Still, the ability of an individual to purchase hashpower (in the form of readily-available old hardware or in the form of renting it) to mine their otherwise-censored transaction is an option as long as the longest-chain rule remains in place across miners. While significantly more expensive than it would be in a truly-decentralized Bitcoin, this does allow Bitcoin to retain some of its anti-censorship properties.