Decentralization

Dr P.Kavitha
ASP/CSE
Decentralization
• Decentralization is not a new concept; it has been used in strategy,
management, and governance for a long time.
• The basic idea of decentralization is to distribute control and authority to
peripheries instead of one central authority being in full control of the
organization.
• This results in several benefits for organizations such as increased
efficiency, quicker decision making, better motivation, and a reduced
burden on top management.
• The decentralization of the blockchain ecosystem, decentralized
applications, and platforms for decentralization.
• Many exciting applications and ideas emerge out of the decentralized
blockchain technology.
Decentralization using blockchain
• Decentralization is a core benefit and service provided by the
blockchain technology.
• Blockchain by design is a perfect vehicle for providing a platform that
does not need any intermediaries and can function with many
different leaders chosen via consensus mechanisms.
• This model allows anyone to compete to become the decision-making
authority.
Decentralization using blockchain
• This competition is governed by a consensus mechanism and the
most commonly used method is known as Proof of Work (PoW).
• Decentralization is applied in varying degrees from semidecentralized
to fully decentralized depending on the requirements and
circumstances.
• Decentralization can be viewed from a blockchain perspective as a
mechanism that provides a way to remodel existing applications and
paradigms or build new applications in order to give full control to
users.
Decentralization using blockchain
• Information and communication technology (ICT) has conventionally
been based on a centralized paradigm whereby database or
application servers are under the control of a central authority, such
as a system administrator.
• With bitcoin and the advent of the blockchain technology, this model
has changed and now the technology that allows anyone to start a
decentralized system (and operate it with no single point of failure or
single trusted authority) is available.
Decentralization using blockchain
• It can either be run autonomously or by requiring some human
intervention depending on the type and model of governance used in
the decentralized application running on the blockchain.
Decentralization using blockchain
• Centralized systems are conventional (client--server) IT systems
whereby there is a single authority that controls the system and is
solely in-charge of all operations on the system.
• All users of a central system are dependent on a single source of
service.
• Online service providers, such as eBay, Google, Amazon, Apple's App
Store, and the majority of other providers, use this common model of
delivering services.
Decentralization using blockchain
• On the other hand, in a distributed system, the data and computation
are spread across multiple nodes in the network.
• Sometimes, this term is confused with parallel computing. While
there is an upcoming diagram shows different types of system that
currently exist, that is, central, distributed, and decentralized.
• This concept was first published in 1964 in a paper by Paul Baran on
distributed communication networks in the context of communication
networks.
Decentralization using blockchain
• Overlap in the definition, the main difference between both these
systems is that in a parallel system, computation is performed by all
nodes simultaneously inorder to achieve a result, whereas in a
distributed system,

• computation may not happen in parallel and data is only replicated on

multiple nodes that users view as a single coherent system.
Decentralization using blockchain

• Both of these models are used with variations in order to achieve

failure tolerance and speed.
• In this model, there is still a central authority that has control over all
nodes and governs processing.
• This means that the system is still centralized in nature.
Different types of network/system
• The key difference between a decentralized system and distributed
system is that in a distributed system, there still exists a central
authority that governs the entire system, whereas in a decentralized
system, no such authority exists.
• A decentralized system is a type of network whereby nodes are not
dependent on a single master node; instead, control is distributed
among many nodes.
•
Different types of network/system
• For example, this is analogous to a model where each department in
an organization has its own database server that they are in charge of,
thus taking away the power from the central server and distributing it
to the sub-departments that manage their own databases.
Different types of network/system
• A real innovation in the decentralized paradigm that has started this
new era of decentralization applications is decentralized consensus,
which was introduced with bitcoin.
• This enables a user to agree on something via a consensus algorithm
without the need for a central trusted third party, intermediary, or
service provider.
Methods of decentralization
• There are two methods that can be used to achieve decentralization.
These methods are discussed in detail in the following sections.
Disintermediation
• This can be explained with the help of an example. Imagine you want
to send money to your friend in another country. You go to a bank
that will transfer your money to the bank in the country of your
choice for a fee.
• In this case, the bank keeps a central database that is updated,
confirming that you have sent the money. With blockchain
technology, it is possible to send this money directly to your friend
without the need for a bank.
Methods of decentralization
• All you need is the address of your friend on the blockchain. This way,
the intermediary is no longer required and decentralization is
achieved by disintermediation.
• However, it is debatable how practical decentralization is in the
financial sector by disintermediation due to heavy regulatory and
compliance requirements.
• Nevertheless, this model can be used not only in finance but also in
many other different industries.
Through competition
• In this method, a group of service providers compete with each other in
order to be selected for the provision of services by the system.
• This paradigm does not achieve complete decentralization, but to a certain
degree ensures that an intermediary or service provider is not
monopolizing the service.
• In the context of blockchain technology, a system can be envisioned in
which smart contracts can choose an external data provider from a large
number of providers based on their reputation, previous score, reviews,
and quality of service.
• This will not result in full decentralization, but it allows smart contracts to
make a free choice based on the criteria mentioned earlier.
Through competition
• This way, an environment of competition is cultivated among service
providers, whereby they compete with each other to become the
data provider of choice.
• In the following diagram, varying levels of decentralization are shown.
On the left-hand side, there is a conventional approach where a
central system is in control; on the right-hand side, complete
disintermediation is achieved; and in middle, competing
intermediaries or service providers are shown.
• In the middle, intermediaries or service providers are selected based
on reputation or voting, thus achieving partial decentralization.
Scale of decentralization
• Benefits of decentralization
• --including but not limited to transparency, efficiency, cost saving,
development of trusted ecosystems, and in some cases privacy.
• --some challenges, such as security requirements, software bugs, and human
errors, also need to be looked at thoroughly.
• For example, in a decentralized system such as bitcoin or Ethereum,
where security is usually provided by private keys,
Scale of decentralization

• How can it be ensured that a smart property associated with these

private keys cannot be rendered useless if, due to a human error, the
private keys are lost or if, due to a bug in the smart contract code,
• The decentralized application is vulnerable to attack by adversaries?
• Before we embark on a journey to decentralize everything using
blockchain and decentralized applications, it is important to
understand that not everything is required to (or can be)
decentralized.
Routes to decentralization
• Even though there are systems that existed before bitcoin or
blockchain that can be classed as decentralized to a certain degree.
• Such as BitTorrent or Gnutella file sharing, with the advent of the
blockchain technology many initiatives are being taken in order
leverage this new technology for decentralization.
Routes to decentralization
• Usually, the bitcoin blockchain is the first choice for many as it has
proven to be the most resilient and secure blockchain with a market
cap of almost 12 billion dollars.
• An alternative approach is to use other blockchains, such as
Ethereum, which is currently the tool of choice of many developers
for building decentralized applications.
Routes to decentralization
• How to decentralize A framework has been proposed by Arvind
Narayanan and others that can be used to evaluate the
decentralization requirements of a variety of things in the context of
blockchain technology.
• The framework basically proposes four questions that, once
answered, provide a clear idea as to how a system can be
decentralized.
Routes to decentralization
• These questions are listed as follows:
1. What is being decentralized?
2. What level of decentralization is required?
3. What blockchain is used?
4. What security mechanism is used?
Need to answer to the questions?
• The first question simply asks what system is being decentralized. This can be any system,
for example an Identity system or trading.
• The next question can be answered by specifying the level of decentralization required by
looking at the scale of decentralization discussed earlier. It can be full disintermediation
or partial disintermediation.
• The third question is quite straightforward, where developers can make a choice as to
which blockchain is suitable for a particular application.
• It can be bitcoin blockchain, Ethereum blockchain, or any other blockchain that is
deemed fit for a specific application.
• Finally, a key question needs to be answered about the security mechanism as to how the
security of a decentralized system can be guaranteed. It can be Atomicity, for example,
whereby either the transaction executes in full or does not execute at all.
• In other words, it is all or nothing. This ensures the integrity of the system. Other
mechanisms can include reputation, which allows varying degrees of trust in a system.
EXAMPLES
• In this section, an example of the application of the afore mentioned
framework is provided.
• In the first example, a money transfer system is selected, which is required
to be decentralized.
• In this case, the four questions mentioned earlier can be answered in order
to evaluate the decentralization requirements. The answers are shown as
follows:
1. Answer 1: Money transfer system.
2. Answer 2: Disintermediation.
3. Answer 3: Bitcoin.
4. Answer 4: Atomicity.
•
EXAMPLES
• By answering these four questions, it can be shown how a payment
system can be decentralized.
• Based on the preceding answers, it can be stated that the money
transfer system can be decentralized by removing the intermediary
and will be implemented on the Bitcoin blockchain with security
guarantee provided via Atomicity.
• Similarly, this framework can be used for any other system that needs
to be evaluated for decentralization.
• By answering these four simple questions, it becomes quite clear as
to what approach can be taken to decentralize the system.
THANK YOU