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UDHCOn Optimal Decentralization
The Decentralization Series: Part TwoRecall the Starting PointPreviously, our post - “On Being Sufficiently Decentralized” - stated that technological decentralization and self-sovereignty are the ingredients for a protocol or application being sufficiently decentralized. But, it is not a natural steady-state; it has to be maintained. Reaching the state of sufficient decentralization is one thing, but maintaining it requires much work. Creating the right environment and framework to sustain t...
UDHCThe Greatest Advantage Handed to the US on a Plate - Stablecoins
***By Steven Becker, CEO of UDHC, former President and COO of the Maker Foundation, which helped build Dai, a crypto-collateralized stablecoin.Stablecoins reinforce the US dollar as the de facto world reserve currency. The entire world wants to use the US dollar, and the US is trying its hardest not to make that happen by holding it close to its chest like a precious heirloom instead of deploying it as an essential tool of liberation. The US dollar, like all currencies, is a one-dimensional t...
UDHCOn Being Sufficiently Decentralized
The Decentralization Series: Part OneWhy Decentralization is ImportantDecentralization is intuitively easy to understand but difficult to define precisely. Creating a blockchain-specific working definition helps attribute value to protocols and applications. Taken a step further, it can help identify the regulatory touchpoints for consumers and investors. Decentralization describes an intention and level of control. For example, a system intended to be centralized could distribute power and b...
UDHCOn Optimal Decentralization
The Decentralization Series: Part TwoRecall the Starting PointPreviously, our post - “On Being Sufficiently Decentralized” - stated that technological decentralization and self-sovereignty are the ingredients for a protocol or application being sufficiently decentralized. But, it is not a natural steady-state; it has to be maintained. Reaching the state of sufficient decentralization is one thing, but maintaining it requires much work. Creating the right environment and framework to sustain t...
UDHCThe Greatest Advantage Handed to the US on a Plate - Stablecoins
***By Steven Becker, CEO of UDHC, former President and COO of the Maker Foundation, which helped build Dai, a crypto-collateralized stablecoin.Stablecoins reinforce the US dollar as the de facto world reserve currency. The entire world wants to use the US dollar, and the US is trying its hardest not to make that happen by holding it close to its chest like a precious heirloom instead of deploying it as an essential tool of liberation. The US dollar, like all currencies, is a one-dimensional t...
UDHCOn Being Sufficiently Decentralized
The Decentralization Series: Part OneWhy Decentralization is ImportantDecentralization is intuitively easy to understand but difficult to define precisely. Creating a blockchain-specific working definition helps attribute value to protocols and applications. Taken a step further, it can help identify the regulatory touchpoints for consumers and investors. Decentralization describes an intention and level of control. For example, a system intended to be centralized could distribute power and b...
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Users of decentralized protocols, such as blockchains and blockchain-based protocols, put a lot of faith in the code that they’re interacting with – the constant worry of “Am I going to get hacked?” – but just under the surface is the importance of decentralization in a protocol, and with it, the ability to remain self-sovereign when using it.
Plenty of brainpower and Twitter threads have dedicated hours defining decentralization's dynamic nature. Still, we can outline a decentralization framework for blockchain and blockchain-based protocols by narrowing the definition to distributed ledger technology.
In doing so, we can see how decentralized a protocol is, giving increased understanding and transparency for users (and yes, regulators too).
Put into practice, picture a user swapping tokens on Uniswap or generating Dai from the Maker Protocol. The average crypto user generally accepts that the protocol is sufficiently decentralized and they’re afforded self-sovereignty. With a proper framework in place, a new user learns what questions to ask to become comfortable; a seasoned user would know how to evaluate the protocols they are using to maintain their confidence.
Consequently, a new standard would be socialized such that protocols like Uniswap or Maker would feature an industry-accepted badge of quality or rating that showcases the level of decentralization and self-sovereignty afforded.
With new protocols built every week, a standard would transform the industry, instantly assuaging user concerns about interacting with the underlying code and directing regulation.
Which begs the question: what framework is required to create such a standard?
Our team at the UDHC has created a short survey anyone can fill out on behalf of a protocol and see where it falls on a spectrum of decentralization.
The following is a high-level look at the framework used to create the survey's specific questions; for a more detailed framework, read here.
At their core, decentralized protocols possess the following attributes: fault tolerance and resilience, attack resistance and transparency, and collusion resistance. Web3 is the Internet of Value, and these attributes ensure the operational integrity and security of the transacted and stored value.
Therefore, we define a decentralized protocol as follows:
A distributed, permissionless, non-jurisdictional infrastructure that serves as a platform to manage value and contribute to building an ecosystem.
Such a protocol should empower the user with self-sovereignty; with this, the protocol can meet the definition of a decentralized protocol.
How can we establish if a protocol possesses the above mentioned attributes?
It can be determined by evaluating four decentralization components at each level of a protocol’s technology stack if the protocol has the attributes. Furthermore, given the attributes, if a protocol affords its user self-sovereignty, it’s concluded to be a decentralized protocol.
The generic technology stack for a blockchain-based protocol is:
Settlement Layer
The executing blockchain.
Smart Contract/Backend Layer
The engineering layer of a decentralized application or dApp.
User Interface/Frontend Layer
The access point to the protocol.
Data Layer
The data storage layer
At each level of the stack, the following decentralization components are evaluated:
Structural component:
The number of tokens/computers/addresses/clients operating the project or protocol.
Control component:
The number of people that control the structural component.
Influence component:
The number of people influencing the control component.
Process component:
The number of processes or functions the protocol has.
If each layer of a protocol’s technology stack is considered decentralized, then the protocol possesses the three attributes and is considered a decentralized protocol.
The final step to verifying decentralization is identifying if the protocol affords the user self-sovereignty. In other words, the user’s transactions, interactions, or value in a protocol are doubtful to be manipulated by another person or group, as well as the ability to contribute and stay freely informed.
A decentralized protocol should give rise to the following user-character traits for the user to claim self-sovereignty:
Political Decentralization:
Transfer of power to the community for public decision-making and influencing policy creation.
Administrative Decentralization
Move responsibility for planning, financing, and management to the protocol and community.
Economic Decentralization:
Give the protocol and the community financial responsibility to generate revenue and control expenditures.
Decentralization is not just a buzzword but a powerful concept that gives users the reins to control and protect their interactions within a digital ecosystem. Understanding this allows us to assess and validate whether a protocol offers self-sovereignty, thus standing tall as a true beacon of decentralization.
We encourage those familiar with protocols, whether layer 1s, layer 2s, bridges, and beyond, to take the survey on their behalf and see how decentralized they are.
https://mirror.xyz/udhc.eth/TmQsVbgRmmFUQuBR_WCmZtQ6ZDWsi8OErWT-8FYF7nc
Users of decentralized protocols, such as blockchains and blockchain-based protocols, put a lot of faith in the code that they’re interacting with – the constant worry of “Am I going to get hacked?” – but just under the surface is the importance of decentralization in a protocol, and with it, the ability to remain self-sovereign when using it.
Plenty of brainpower and Twitter threads have dedicated hours defining decentralization's dynamic nature. Still, we can outline a decentralization framework for blockchain and blockchain-based protocols by narrowing the definition to distributed ledger technology.
In doing so, we can see how decentralized a protocol is, giving increased understanding and transparency for users (and yes, regulators too).
Put into practice, picture a user swapping tokens on Uniswap or generating Dai from the Maker Protocol. The average crypto user generally accepts that the protocol is sufficiently decentralized and they’re afforded self-sovereignty. With a proper framework in place, a new user learns what questions to ask to become comfortable; a seasoned user would know how to evaluate the protocols they are using to maintain their confidence.
Consequently, a new standard would be socialized such that protocols like Uniswap or Maker would feature an industry-accepted badge of quality or rating that showcases the level of decentralization and self-sovereignty afforded.
With new protocols built every week, a standard would transform the industry, instantly assuaging user concerns about interacting with the underlying code and directing regulation.
Which begs the question: what framework is required to create such a standard?
Our team at the UDHC has created a short survey anyone can fill out on behalf of a protocol and see where it falls on a spectrum of decentralization.
The following is a high-level look at the framework used to create the survey's specific questions; for a more detailed framework, read here.
At their core, decentralized protocols possess the following attributes: fault tolerance and resilience, attack resistance and transparency, and collusion resistance. Web3 is the Internet of Value, and these attributes ensure the operational integrity and security of the transacted and stored value.
Therefore, we define a decentralized protocol as follows:
A distributed, permissionless, non-jurisdictional infrastructure that serves as a platform to manage value and contribute to building an ecosystem.
Such a protocol should empower the user with self-sovereignty; with this, the protocol can meet the definition of a decentralized protocol.
How can we establish if a protocol possesses the above mentioned attributes?
It can be determined by evaluating four decentralization components at each level of a protocol’s technology stack if the protocol has the attributes. Furthermore, given the attributes, if a protocol affords its user self-sovereignty, it’s concluded to be a decentralized protocol.
The generic technology stack for a blockchain-based protocol is:
Settlement Layer
The executing blockchain.
Smart Contract/Backend Layer
The engineering layer of a decentralized application or dApp.
User Interface/Frontend Layer
The access point to the protocol.
Data Layer
The data storage layer
At each level of the stack, the following decentralization components are evaluated:
Structural component:
The number of tokens/computers/addresses/clients operating the project or protocol.
Control component:
The number of people that control the structural component.
Influence component:
The number of people influencing the control component.
Process component:
The number of processes or functions the protocol has.
If each layer of a protocol’s technology stack is considered decentralized, then the protocol possesses the three attributes and is considered a decentralized protocol.
The final step to verifying decentralization is identifying if the protocol affords the user self-sovereignty. In other words, the user’s transactions, interactions, or value in a protocol are doubtful to be manipulated by another person or group, as well as the ability to contribute and stay freely informed.
A decentralized protocol should give rise to the following user-character traits for the user to claim self-sovereignty:
Political Decentralization:
Transfer of power to the community for public decision-making and influencing policy creation.
Administrative Decentralization
Move responsibility for planning, financing, and management to the protocol and community.
Economic Decentralization:
Give the protocol and the community financial responsibility to generate revenue and control expenditures.
Decentralization is not just a buzzword but a powerful concept that gives users the reins to control and protect their interactions within a digital ecosystem. Understanding this allows us to assess and validate whether a protocol offers self-sovereignty, thus standing tall as a true beacon of decentralization.
We encourage those familiar with protocols, whether layer 1s, layer 2s, bridges, and beyond, to take the survey on their behalf and see how decentralized they are.
https://mirror.xyz/udhc.eth/TmQsVbgRmmFUQuBR_WCmZtQ6ZDWsi8OErWT-8FYF7nc
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