The Myth of Decentralization

Juice
3 min readJun 21, 2018

It’s taking me a long time to understand the system that bitcoin functions within. I am often slow at understanding systems. I had a friend try to explain mining versus nodes to me and eventually he just kept saying “read the whitepaper”. I get offended by such statements because I HAVE read the whitepaper (multiple times etc.) and so it doesn’t help me to repeatedly tell me to read it.

To his surprise, after finally listening to his advice, I came back to tell him there is no such distinction in the whitepaper. As I understand the evolution of nodes and mining pools, in this manner, was not something Satoshi foresaw (I find that strange though!).

Now that I understand a little better, after talks in the Dragon’s den, I have insight that stems from my understanding of Adam Smith’s TOMs (not sure I fully read it yet!).

This insight explains to me why Szabo is at odds with Nash’s work and sheds more light on the implications of the advent of bitcoin.

Szabo has decades of work that is very much cruxed on the idea that third parties are security holes.

I make the correction that TRUSTWORTHY third parties are not security holes and I think that is an important point to make.

Szabo makes the argument that we need to decentralize all things. The implication is that bitcoin is decentralized versus, for example, a central bank in regard to the money supply. So there is a sort an anarchist-capitalist tone which is essentially the motto of the cypherpunk community-that technology can be used to take back our freedom (which is sort of absurd when it is our governments that ensure us greater and greater freedoms over time).

Furthermore, the implication is that a government figure or a central banker, being humans, have (central) authority to take actions that (negatively) affect the well being of the population. Roger Ver, for example, has been quoted explaining politicians can just print as much money as they want.

Now I am reminded of the question of the centralization of mining. We might observe a situation in which the Chinese mining “monopoly” (it is not a monopoly from an international consideration as there is no international government to grant it to be) has well over 51% of the network.

I asked the mumble chat what an attacker could do with such control and the general consensus is nothing really. Why? Because the nodes are the last verifiers of valid blocks.

It is very much as if the miners must function in front of an otherwise impartial jury that is quite interested in bitcoin retaining its validity. From this view the more identifiable the mining monopoly is the more accountable it becomes. It seems to me mining centralization would be a fine result and is also a fine possibility.

Here is where we stray from Szabo and I think to view the world in a more proper and balanced light.

Our current financial system and currencies work the same way.

A politician or a banker or a Fed chair etc. cannot actually make policies on their own whims. Szabo should know this as he is a graduate of George Washington Law. But I understand now that he got this degree from the perspective of a tech based an-cap and I think this has skewed his vision.

It is a very critical observation to make that it is propriety that guards the supply of money and in this sense we can understand there is not really a problem of centralization and there is not really a solution that is decentralization.

A system can be setup up with the proper checks and balances and /or in such a way that the objective is essentially achieved. Satoshi didn’t inspire a “decentralization movement” that will actually reform everything. Bitcoin simply evolved to inherit the same checks and balances that our legacy financial system has-which is effectively using the propriety of the population as the guardian of the supply (I’m not confident I use the word propriety correctly but I am referring essentially to the social norm and I am fine with how I use the word).

And with this we can understand that it is propriety that is the strongest force we have available and it can be used to demand Ideal Money.

If someone wants to disagree and suggest that a central banker can go against the will of propriety call them a charlatan. They aren’t observing reality, they are justifying their ignorance and anarchist misunderstanding of the world and the role and benefit of government.

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