Essay on Bitcoin and sea sponges … oops on decentralization

Centralization is easy but comes with a hidden cost

Why invent something as complex as Bitcoin when it would be much easier and more efficient to appoint a guarantor that keeps track of all the transactions in a giant Excel spreadsheet? For each payment it would be enough to invoke the guarantors swift and wise action to see whether the payer has enough credit and in that case, to proceed. This is more or less what happens when you make a payment with your credit card. It means that at our request someone moves our money from our account to someone elses account. We are used to that, and it does not seem to be a problem. The banks have our money and they move it for us; its nothing strange.

But we should start changing our mindset, because this is, actually, very strange. Let’s start with how we make purchases by credit card. Over the phone, for example. We dictate the various numbers and secret codes, and on the other side of the wire there is someone who may write them on a piece of paper or input them on an Excel spreadsheet. We don’t even know how this information is managed. Someone can persuade us to stay calm, “our company takes protecting our customers’ data very seriously”. Now let’s talk about purchasing on the web. We put the details of our credit card in a web page and then we send them all over the network. Nowadays we assume this communication is always encrypted but I bet in many cases it is not. On the other side someone takes our data and stores them in a database and then uses these details to charge us. But what if someone casts an eye on the database and decides to buy their holidays with your money? I know what youre thinking my card has insurance; they always return the money in cases of fraud. Right, but who pays the insurance? There is a cost associated with the insecurity of electronic transactions, and the person who pays it is you. You pay with fees or a higher interest rate. In 2014 in the UK alone the money stolen from credit card transactions was about £479m.

Distributed ≠ Decentralized

When money is involved, it is usually sound to assume that sooner or later someone will try to play the system and to get more than they really deserve. If “trust nobody” is our watchword, then decentralization is a good option for us. The word de-centralize itself means get rid of the center, because the “center” is usually where choices are made, commands are issued, and foot soldiers are sacrificed for the sake of superior causes. The central brain of every system is supposed to be honest and to treat every matter with the utmost fairness. But, what if it is not honest? “Decentralized” does not equate to “dispersed” or “distributed”. In other words, a decentralized system is always distributed across many actors, but a distributed system could be centralized if all the parts are under the control of one or a few entities. Let’s take Google as example. The set of all Google services and computers are distributed across the globe to provide better service quality, guarantee redundancy and backup, and to allow further scalability. However, all Google computers are under the control of Alphabet, the holding company that owns Google.

Good examples of decentralized systems are the so called peer-to-peer networks. Some of them, like Bittorrent and eMule, are still quite popular nowadays, while others, like Gnutella and Napster, silently faded away into their niches in the history of the Internet.

The characteristics of peer–to-peer systems is that nobody owns the network, but all participants are eligible to own their own part of it and become first-class citizens. I don’t want to discuss here whether the decentralized model is better or worse than the centralized one. There are pros and cons to both. In nature, it is difficult to find examples of fully decentralized systems. A biological example of a completely decentralized being is the sea sponge (Porifora). Every part of the sea sponge is equivalent to the others; there are no specialized tissues or organs, such as a brain. It is a notable example of incredible resilience. However, the world is ruled by beings with centralized biological functions and not by sea sponges. The brain of Homo Sapiens is a more important organ than all its others. There is a reason behind the evolution towards specialized organs that we do not fully understand yet. That said, decentralization has some unique advantages: no part is unique and the system has no dependability or single point of failure. If you put a sea sponge in a blender you will get thousands of microscopic sponges, each one able to grow as a new individual. We can venture to say that Bitcoin is like the sea sponge of digital currencies, you can attack and destroy many computers in its network, but it can still stand and resume operations and transaction histories from the point the attack was inflicted.

A swarm is a remarkable example of decentralized “creature”

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