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The Problem with Blockchain and Decentralization – The Loss of Control

Blockchain technology introduces decentralization as a method to achieve efficiency and enhance security. It does this by removing power from a centralized source of control and sharing it with a network of nodes or partners. Efficiency improves by sharing the workload and security by spreading the risk. By nature, a distributed network is harder to attack than a centralized single command center. And smaller tasks are easier and faster to achieve. However, decentralization has a very  clear problem that is hard to reconcile with the benefits brought about by the blockchain: the loss of control.

Loss of control

Decentralization means no single node has more power than the rest; all participants have equal footing in consensus and operational management of the network. However, this concept works well on paper but it is very difficult to implement in real life. The first and most difficult question is how to initiate consensus without reverting back to centralization. Someone has to be the first to identify a problem or put forth an upgrade, and someone must decide when action must be taken, and what kind. The problem is how to decide who will be the first to make the first decision. And how to to do it without seeing that single individual as a ruler of the network. EOS is an ongoing example of how the loss of control acts in a real world application. 

EOS

The Proof-of-Stake consensus mechanism is a way to address this problem. Where member’s decision making power is conmesurate with the amount of tokens held in their wallet. In other words, the more tokens you own, the more you risk losing if you act maliciously against the network. This concept is also at the core of EOS’ scaling solution – the largest holders are the ones validating all transactions. But this is where decentralization runs into a wall. Earlier this year it was noted that 50% of EOS was owned by only 10 wallet members. This includes Block.one, the company that created EOS. In Bitcoin, the token distribution is just as disparate; 99% of Bitcoin is owned by 1% of wallets.

More problems

SO, to patch this offspring problem, the company came out with the idea of block producers or BP. 21 democratically elected members will make all confirmations and up-keeping decisions regarding the network).  But then this process came under fire by claims of the fraud by the suspected presence of voting bots and rented proxies. Not to mention bribes among block producers to form alliances and voting cartels.
Nowhere was EOS’ system more challenged than on June 22, 2018, when the EOS Core Arbitration Forum (ECAF) instructed the block producers to freeze 27 accounts suspected of theft and phishing attacks. This marked the first time the creators of the network, under the veil of the ECAF made a unilateral decision to restore order to the network. And forced many to accept that a degree of central control is avoidable to maintain stability.

Analysis 

EOS is meant to be the Utopian model of a decentralized dapps platform.  But instead, it highlights one of decentralization’s most glaring problem – the lack of control. The same issue appears in decentralized exchanges. Simply put, decentralized exchanges are a mess. In order to prevent a centralized structure and allow for a freely P2P exchange and trade, tools, service, and support are kept to a minimum. This makes for a very difficult trading experience and total lack of user friendly interface. The system makes it almost impossible for inexperienced investors to find their footing. This is a contrast to the larger, centralized exchanges like Binance,  Coinbase, and Bittrex.
This point is not to say that decentralization does not work. But that it still has ways to go before it can replace current, proven centralized systems. At minimum it showcases that total decentralized governance is full of challenges. And solutions to them are necessary before moving forward to crypto mmainstream adoption.

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