Decentralization is a core benefit and service provided by blockchain technology. By design, blockchain is a perfect vehicle for providing a platform that does not need any intermediaries and that 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 a semi-decentralized model to a fully decentralized one 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 to build new applications, in order to give full control to users.

Information and...

Two methods can be used to achieve decentralization: disintermediation and competition (Contest-driven decentralization). These methods will be discussed in detail in the sections that follow.

The concept of disintermediation can be explained with the aid of an example. Imagine that you want to send money to a friend in another country. You go to a bank who, for a fee, will transfer your money to the bank in that country. In this case, the bank maintains a central database that is updated, confirming that you have sent the money. With blockchain technology, it is possible to send this money directly to your friend without the need for a bank. All you need is the address of your...

Even though there were systems that pre-existed blockchain and Bitcoin, including BitTorrent and the Gnutella file sharing system, which to a certain degree could be classified as decentralized. However, with the advent of blockchain technology, many initiatives are now being taken to leverage this new technology for achieving decentralization. The Bitcoin blockchain is typically the first choice for many, as it has proven to be the most resilient and secure blockchain and has a market cap of nearly $145 billion at the time of this writing. Alternatively, other blockchains, such as Ethereum, serve as the tool of choice for many developers for building decentralized applications. As compared to Bitcoin, Ethereum has become a more prominent choice because of the flexibility it allows for programming any business logic into the blockchain by using smart...

To achieve complete decentralization, it is necessary that the environment around the blockchain also be decentralized. The blockchain 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, which are traditionally based on centralized paradigms, and there's a need to decentralize these aspects as well in order to achieve a sufficiently decentralized ecosystem.

Data can be stored directly in a blockchain, and with this fact it achieves decentralization. However, a significant disadvantage of this approach is that a blockchain is not suitable...

A smart contract is a decentralized program. Smart contracts do not necessarily need a blockchain to run; however, due to the security benefits that blockchain technology provides, blockchain has become a standard decentralized execution platform for smart contracts.

A smart contract usually contains some business logic and a limited amount of data. The business logic is executed if specific criteria are met. Actors or participants in the blockchain use these smart contracts, or they run autonomously on behalf of the network participants.

More information on smart contracts will be provided in Chapter 9, Smart Contracts.

DOs are software programs that run on a blockchain and are based on the idea of actual organizations with people and protocols. Once a DO is added to the blockchain in the form of a smart contract or a set of smart contracts, 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 that runs atop a blockchain and embedded within it are governance and business logic rules. DAO and DO are fundamentally the same thing. The main difference, however, is that DAOs are autonomous, which means that they are fully automated and...

Today, there are many platforms available for decentralization. In fact, the fundamental feature of blockchain networks is to provide decentralization. Therefore, any blockchain network such as Bitcoin, Ethereum, Hyperledger Fabric, or Quorum can be used to provide decentralization service. Many organizations around the world have introduced platforms that promise to make distributed application development easy, accessible, and secure. Some of these platforms are described next.

Ethereum tops the list as being the first blockchain to introduce a Turing-complete language and the concept of a virtual machine. This is in stark contrast to the limited scripting language in Bitcoin and many...

In this chapter, we introduced the concept of decentralization, which is the core service offered by blockchain technology. Although the concept of decentralization is not new, it has gained renewed significance in the world of the blockchain. Consequently, various applications based on a decentralized architecture have recently been introduced.

We began the chapter with an introduction to the concept of decentralization. Next, we discussed decentralization from the blockchain perspective. Moreover, we introduced you to ideas relating to the different layers of decentralization in the blockchain ecosystem and to the several new concepts and terms that have emerged with the advent of blockchain technology and decentralization from the blockchain perspective, including DAOs, DACs, and DApps. Finally, we looked at few examples of decentralized applications.

In the next chapter...