Decentralization - Principles #12

Decentralization - Principles #12

Publish Date
Jan 29, 2022
Principles Series
Last Edit
Mar 23, 2022 12:53 AM
Word Count
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If you had a choice, would you rather get $100k per year in income from a single source, or $10k in income from 10 different sources? Or what about if you got $0.01 in income from 10 million sources?
Presuming these sources all act relatively independently, you’d very likely want the last case - where you receive a single penny from 10 million different sources. Such a situation is much more robust to failure and can naturally survive the loss of one, or even 1,000, of your sources of income. Meanwhile, if you rely on a single source for the $100k, then you are always only one misstep away from having no income.
This simplified scenario neglects other factors such as growth, work involved, et cetera. But it should paint a clear picture of why decentralization is valuable. Distributing your income over 10 sources is better than one, and distributing that to a thousand or a million is even better.*
This concept of decentralization has been around long before the rise of 💰Crypto and cryptocurrencies, and it is a core component to understanding how systems work and how more resilient ones can be built. We want to evolve systems toward distributed resilience. While early airplanes would fail (and crash) relatively frequently, modern planes can fly for more than five hours even if one of the engines fail!
When we look at systems, we can broadly visualize decentralization like this:
notion image
The first system (A) would fail if the one central node breaks: e.g. a single-engine plane where the engine stops working (or a modern economy where the central bank stops working properly).
The second system (B) would degrade if any node stopped working, but would still function in a limited capacity.
Finally, a distributed system (C) would function at basically full capacity no matter which node (or nodes) stopped working!
So from a system perspective, (C) is self-evidently optimal (all else held equal) because over a long enough time horizon, the chance of any part failing at some point is 100%. If you are still centralized when that point fails, then, boom, the whole system falls.
We’ll cover this more next time, but recent history has been a journey toward centralization: from tribes on the savannah to towns, cities, nations, and empires. While one could reasonably claim that trend should continue towards one world government, the counterproposal is that we can now unwind much of this centralization to produce a future that is robust to the failure of such a world government.
* = better insofar as you have the infrastructure to scale, of course.