The Heartbeat of Cardano.

Decentralization Is Often An Overrated And Misunderstood Concept

Do you know the difference between a Decentralized and a Distributed network? I had doubts about the subtle difference, or not so subtle, since I later understood it.

Development models and network architectures (network topography) are two completely independent dimensions. I will explain the difference between both concepts from the point of view of the systems infrastructure.

There are three basic possibilities of structures for network systems: centralized, decentralized and distributed.

Baran, P. (1964). On Distributed Communications, Memorandum RM-3420-PR.

In a centralized system, all users are connected to a central network owner or “server.” The central owner stores data and information that can be accessed by connecting users.

A centralized system is easy to set up and can be developed quickly, presenting speed in your transactions. But this system has an important limitation in terms of its functionality and security, it has a single point of failure, since if the server fails, or is attacked, the system will not work correctly and users will not be able to access the data.

Unlike these, there are distributed and decentralized systems, which come to mind when we talk about blockchain systems. They are two different working systems: decentralized is a single processing point transferred to several clients, while distributed refers to multiple processing points transmitted between all of them.

What Is A Decentralized Network?

Decentralized systems do not have a central owner. Instead, they use multiple clients, each of which typically stores a copy of the resources that users can access.

A decentralized system is more fault tolerant than a centralized one, since when one or more servers or central owners fail, the others can continue to provide data access to users. The resources remain active if at least one of the servers is still running.

Decentralized networks use a variety of different connection points, or nodes, to make information available, but they do not have distributed decision-making power at each node.

What Is A Distributed Network?

A distributed system also does not have a single central owner.

The key feature of distributed networks, in contrast to decentralized networks, is the use of equally powerful connection points in the production of information.

In a distributed system, users have equal access to data, although user privileges can be enabled when necessary. The best example of a vast distributed system is the Internet itself.

However, distributed networks can be centralized, unlike decentralized networks. The topography of the distributed network can be centralized, if the production is concentrated in a few producers.

On the other hand, decentralized networks do not have the possibility of transforming into a distributed production scheme.

Differences Between Distributed And Decentralized Networks

The main difference between distributed and decentralized comes down to where the decision is made, and how the information is sent through the various nodes in the system.

In a distributed network, its topography allows the distribution of data and decision-making, and that this is distributed evenly across all servers, which is not the case in decentralized networks. Essentially, and in theory, the structure of the network is that each distributed server gets exactly the same amount of power for control.

This should not be confused with the possibility of centralizing a distributed network, as previously explained.

Blockchains, for the most part, have adopted distributed systems, known as Distributed Ledger Technology (DLT).

On the IOHK blog, in the article The University of Edinburgh and IOG introduce the Edinburgh Decentralization Index talks about the approach of decentralization in the production of information:

Networks are often structured as centralized, distributed, or decentralized. A decentralized network’s security increases as the number of participants increases. The same outcome cannot be achieved on centralized or distributed networks.

With most blockchains claiming to be decentralized, it is hard to determine each claim’s validity. Any assertion of decentralization remains highly subjective.

Can a blockchain be truly decentralized if a minority of its validators is responsible for mining or minting a majority of blocks? What qualifies as decentralization? What quantifiable standard of decentralization can be deemed objective?”

Why Not Read Who Knows?

In an interesting exchange of ideas between members of the Cardano community, the issue was raised on Twitter. Let’s see.

Matthew Benkort, Technical Director of the Cardano Foundation, sparked the debate in a tweet: “Minor controversial suggestion of the day: Can we all stop saying “decentralized” and start saying “distributed” instead — at least when it comes to #Cardano. That’d be great 😶.”

Alessandro Konrad, Co-Founder of SpaceBudz, Operator of Cardano Stakepool and Creator of Nami Wallet, answered: “Sorry, disagree :)” and presented a query screen to ChatGPT

Matthew Benkort answered: “I don’t agree at all with the last part of that definition. A distributed system is a type of decentralized system; not the other way around. A distributed system is precisely a system without central authority where all nodes of the system are on an equal foot.”

Alessandro Konrad Tweeted: “So you would say “decentralized” is a subset of “distributed”? What do distributed systems have decentralized systems do not have?

Matthew Benkort answered: “The ability for each node to run as a client or a server. In a decentralized system, you can’t generally become a server. You can only be a client of some existing server. Any node can (in principle) do the job of any other. There’s only one “cardano-node”.

Matthew Plomin, founder of Mehen, USDM stablecoin: asked Regarding the initial statement: “Why? And in what context?

Matthew Benkort answered:  “When talking about systems / networks. For example instead of “Cardano is a decentralized platform”, one should say “Cardano is a distributed platform”. It’s kind of odd that the term “decentralized” got so massively adopted  🤷”

Smaug a.k.a. Remy, Cardano stakepool operator and founder of and nftcdn, said: “I don’t feel like “distributed” includes the notion of “permissionless”.”

Matthew Benkort answered: “Decentralised doesn’t either though. Both require consensus / coordination but they do not restrict how consensus is achieved. That is another dimension. Here, I am mainly referring to networks.”

LiberLion asked: “‘Decentralization’ implies permissionless. Is it possible a decentralized network  being not permissionless? I think permission is given by a central authority.

Matthew Benkort answered me: “No it does not. Take Netflix or YouTube, they are decentralised system architectures and absolutely not permissionless. You can’t run your own YouTube server. 

Matthew Benkort, continued the topic in a thread:Some clarifications on the point made here and what turned out to be a more interesting thought exercise than I anticipated… I am here talking about network architectures. The word “decentralised” is however quite overloaded in our industry.

“Before crypto and blockchains, I believe that word was used to exclusively refer to network architectures and there wasn’t so much ambiguity. Now, it also usually entails notions of governance, power, openness etc.. which makes any mention of “decentralization” kind of ambiguous. Blockchains are in essence, distributed networks. Don’t we call that “distributed ledger technology” (abbrev. DLT) after all?

In a distributed system, all nodes have equal capabilities and there’s no central coordinating authority. Plus, consensus is needed between nodes. In a decentralised system however, there’s an imbalance between the service providers and the clients that consume those services. They provide slightly more resilience than central ones.

Often, decentralised network architectures are also called “federated”.

Yet, from a pure networking perspective nothing is really said about who controls the nodes, their governance model or even their licensing policy.  These are all concepts that are now usually associated with decentralisation to the point where the original terminology got lost.

I think it is however important to put the right words on concepts otherwise, we’re having conversations on completely different assumptions.

When I see someone speaking about decentralisation, I am usually assuming they’re NOT talking about network architectures. 

Yet often, I also see claims about “decentralised systems” which are effectively decentralised — a.k.a federated — network architectures but, contemplate the wider sense of decentralisation and happily let the confusion & doubt settle in.”

Final Words

To close the topic, a tweet of Dr. Michael Liesenfelt explains the idea: “Cardano is distributed on 3000 validator nodes. Cardano is decentralized to ~38 groups on average (k-eff 38) with a 20 group 51% majority (MAV20).”, referring to the calculation that he himself designed on K-effective, “The “average resulting decentralization” or “effective decentralization” taking into account groups or entities of stake pools. One group could be running multiple stake pools, which lowers the realistic, effective decentralization”.

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