Decentralization is a core benefit and service provided by the blockchain technology. Blockchain by design is a perfect vehicle for providing a platform that does not need any intermediaries and can function with many different leaders chosen via consensus mechanisms. This model allows anyone to compete to become the decision-making authority. This competition is governed by a consensus mechanism and the most commonly used method is known as Proof of Work (PoW).

Decentralization is applied in varying degrees from semi-decentralized to fully decentralized depending on the requirements and circumstances. Decentralization can be viewed from a blockchain perspective as a mechanism that provides a way to remodel existing applications and paradigms or build new applications in order to give full control to users.

Information and communication technology (ICT) has conventionally been based on a centralized paradigm whereby database or application servers are under...

There are two methods that can be used to achieve decentralization. These methods are discussed in detail in the following sections.

Even though there are systems that existed before bitcoin or blockchain that can be classed as decentralized to a certain degree, such as BitTorrent or Gnutella file sharing, with the advent of the blockchain technology many initiatives are being taken in order leverage this new technology for decentralization. Usually, the bitcoin blockchain is the first choice for many as it has proven to be the most resilient and secure blockchain with a market cap of almost 12 billion dollars. An alternative approach is to use other blockchains, such as Ethereum, which is currently the tool of choice of many developers for building decentralized applications.

In order to achieve complete decentralization, it is necessary that the environment around the blockchain is also decentralized. Blockchain itself is a distributed ledger that runs on top of conventional systems. These elements include storage, communication, and computation. There are other factors, such as Identity and Wealth, that are traditionally based on centralized paradigms and there's a need to decentralize these aspects too in order to achieve a fully decentralized ecosystem.

A smart contract can be thought of as a small decentralized program. Smart contracts do not necessarily need a blockchain to run; however, due to the security benefits that the blockchain technology provides, it is now becoming almost a standard to use blockchain as a decentralized execution platform for smart contracts. A smart contract usually contains some business logic and a limited amount of data. Actors or participants in the blockchain use these smart contracts or they run autonomously on behalf of the network participants.

These small programs reside on the blockchain and execute business logic if some specific criteria are met. More information on smart contracts will be provided in Chapter 6, Smart Contracts, which is dedicated to a detailed discussion of smart contracts.

Decentralized organization (DOs) are software programs that run on a blockchain and are based on the idea of real human organizations with people and protocols. Once a DO, in the form of a smart contract or a set of smart contracts, is added to the blockchain, it becomes decentralized and parties interact with each other based on the code defined within the DO software.

Just like DOs, a Decentralized autonomous organization (DAO) is also a computer program than runs on top of a blockchain and embedded within it are governance and business logic rules. DAO and DO are basically the same thing, but the main difference is that DAOs are autonomous, which means that they are fully automated and contain artificially intelligent logic, whereas DOs lack this feature and rely on human input in order to execute business logic.

Ethereum blockchain led the way with the introduction of DAOs for the first time. In DAO, the code is considered the governing entity rather than humans or paper contracts. A Curator, however, is a human entity that participates as someone who maintains this code and acts as a proposal evaluator for the community. DAOs are capable of hiring external Contractors if enough input is received from the token holders (participants). The most famous DAO project is The DAO (https://daohub.org) as it raised 168 million...

DAOs, Decentralized autonomous corporations (DACs) are a similar concept but are considered a smaller subset of DAOs. The definitions of DACs and DAOs can sometimes overlap, but a general difference is that DAOs are usually considered to be nonprofit, whereas DACs can make money via shares offered to the participants and by paying dividends. These corporations can run a business automatically without human intervention based on the logic programmed within them.