Prominent Bitcoin (BTC) developer Jimmy Song recently explained what he thinks decentralization means. His explanation was in the form of four interesting yes/no questions that he asked his followers.
Song’s first question was “did you have an initial coin offering (ICO)?” According to the University of Michigan computer science graduate, conducting an ICO to raise funds means your platform is not truly decentralized. That’s because the funds raised are being held in the custody of a select group of people.
So, these few people are controlling a project’s financial resources - which means that management is centralized. Going on to question whether projects have a creator who’s “still involved”, Song argued that this would mean the project is not decentralized as the creator(s) may still be making key decisions.
Single Point Of Failure
The third question Song asked was does a blockchain project “hard forks regularly.” The Bitcoin developer and instructor thinks that conducting hard forks, or backward incompatible upgrades, technically means your project is not decentralized. In a Medium post earlier this year, Song noted that “hard forks are altcoins.” In other words, once a coin has been forked and the previous versions of the clients and blockchain supporting it are not compatible with the latest versions, then that means we’ve got two separate networks and two coins, instead of just one.
The last question Song asked was whether a project has “governance.” Answering yes to this question, according to the Bitcoin developer, indicates that your blockchain project is centralized. Although there is no consensus regarding specific criteria (or conditions) for a business or platform to be considered centralized (or decentralized), it is a highly popular topic of debate on social media.
Joseph Young: P2P Exchanges That Do KYC Can't Be Successful
Well-known crypto journalist Joseph Young also recently shared his views regarding decentralization. In a tweet, Young noted:
Many decentralized crypto exchanges have not been successful because they're a hybrid. The exchange either has to be completely decentralized/uncensorable or centralized, in between doesn't have many merits. A decentralized exchange doing know-your-customer (KYC) kind of destroys the point.
Although some may think it’s debatable whether an exchange is decentralized or centralized solely based on if it conducts KYC checks, decentralized digital asset exchanges appear to be becoming increasingly popular. As CryptoGlobe covered, the Waves platform offers a built-in decentralized exchange (DEX) that is easily accessible - as all that’s required is for a user to create a Waves wallet (with no KYC checks yet).
However, a commonly held view among many analysts is that the security and ease-of-use of decentralized digital currency platforms, or centralized ones, are two main areas where there needs to be drastic improvement - before cryptos can achieve mainstream adoption.