Decentralization

Consider the following two forms of decentralization:

  1. There is no executive power. Actions of an organization are determined by voting.
  2. There is no centralized enforcement mechanism. Cheating is prevented by decentralized methods.

Many people in the blockchain world think of #1 when they think of what decentralization, but #2 is actually more essential to the ecosystem. The elephant in the room when it comes to centralization is the traditional legal system based around a monopoly of force held by government. Traditional organizations are held together by legal restrictions and fiduciary duties enforced by government.

A decentralized blockchain holds out the promise that you can achieve trustless cooperation. In some cases that cooperation might entail collecting funds to empower an individual. Whenever you do that, the power that is collected is “centralized” in the first sense. The individual who is funded has executive power over how to use them (and might misuse them).

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