Dr. Craig Wright in Photoshoot

Everything you thought you knew about decentralization is wrong—allow Satoshi Nakamoto to explain why

The concept of decentralization has quickly become one of the most important—and misunderstood—concepts of the 21st century. Since the rise of Bitcoin in 2009 and the blockchain boom that followed in its wake, talk of decentralization and the value that it represents for different populations, industries, technologies, and more has been common fodder for talking heads and technologists alike (although the latter more frequently use it as a buzzword for hawking whatever the latest Ponzi scheme they’re being paid to promote is).

Yet despite the increasingly ubiquitous nature of the term itself, it remains a concept that is largely—if not entirely—misunderstood and misrepresented to the masses. The more cynical of us would say that this has been an intentional misdirect for personal gain—as is so frequently the case in the murky world of blockchain technology and “cryptocurrencies.” Optimists, on the other hand, would likely argue that any misunderstandings related to such a nascent technology are derived from a lack of education and explanation rather than deliberate malice, with Bitcoin and blockchain evangelists alike approaching their teachings and discussions from a place of positivity and with the best of intentions.

I’ll let you be the judge.

But whichever your stance, Dr. Craig Wright, better known to most as Satoshi Nakamoto—the creator of Bitcoin and the visionary behind blockchain technology (and himself an eternal optimist who seeks to see only the good in others)—kindly volunteered his time to take to the TEDx stage in an effort to clear up a common source of confusion and dispel misunderstandings around the concept of what decentralization actually is.

“Decentralization has been created into something involving technology. It’s not. The term decentralization really refers to bringing things out to the edges.” Dr. Wright explained in the opening salvo of his talk.

“Decentralization isn’t just about having nodes, and it isn’t about Silicon Valley controlling everything; it’s about individuals trading and exchanging. It’s about people. Decentralization is about direct exchange—peer-to-peer—between people.”

Anyone that has at least made it past the title of Dr. Wright’s white paper, “Bitcoin: A Peer-to-Peer Electronic Cash System,” will be comfortably following along so far—although, as we know that even self-anointed “Bitcoin experts” haven’t done as much—it’s imperative for Satoshi to truly take it back to basics with such an important discussion as this.

Focus on the man; not the machine

The concept of decentralization—as it pertains to blockchain technology in particular—goes hand-in-hand with discussions about scaling, with the oft-repeated yet entirely incorrect interpretation focused around the number of nodes on the network (ironically, nodes, their role, and their purpose, are themselves also a topic prone to serious misunderstandings). But the reality is that nodes have nothing to do with how centralized or decentralized a blockchain is. What matters are the humans involved and the concentrations of both soft and hard power.

“[Decentralization] is not like people say [when referring to] Bitcoin or Ethereum, about a central system running a few nodes, because nodes aren’t what makes Bitcoin decentralized,” Dr. Wright explained. “Nodes aren’t the answer: nodes index. In these systems, they record information. But the exchange [of information] should be decentralized.”

Consider two individuals transacting in an arms-length, direct manner and how that transaction would typically occur: they communicate on the details of the transaction, document the specifics, complete the exchange of value—be that goods, services, or otherwise—then record the completion of the transaction in an appropriate manner, be that through an invoice, a receipt, a purchase order—or, in the context of this discussion, to a distributed ledger or blockchain.

“All of that stuff individually has nothing to do with nodes; it has nothing to do with people outside in the world,” Dr. Wright explained. “It has only to do with them.”

The role of a node in a blockchain network here only concerns the recording of the information. The transaction itself—from negotiation and agreement, through to exchange and completion—occurs entirely between the participants directly involved in the transaction. In this scenario, which is how a standard peer-to-peer transaction occurs, the number of people recording the transaction—be they nodes on a blockchain or record keepers at a library—has no impact on how decentralized the transaction is.

This concept exemplifies the true meaning and purpose of Bitcoin—both as described in the white paper, as a system of peer-to-peer electronic cash (with the emphasis here on the peer-to-peer component)—as well as in Dr. Wright’s informal writingsacademic contributions, and talks—including, of course, this very speech. But instead, the meaning of decentralization has been perverted to fit the agenda of self-interested bag holders of BTC—or worse still, holders of Ethereum, which, in the supposed name of decentralization, has concentrated the power of the network to an even smaller number of individuals than before with “The Merge” to a Proof-of-Stake system—a concept which Dr. Wright dissected and vociferously rejected in an academic paper.

A lesson in political history

Yet, despite what self-interested BTC bag holders would be all too happy to have you believe, not only does the concept of decentralization have nothing to do with technology, it’s not even a new concept. The human aspect of decentralization is a phenomenon seen all throughout our world and one that has been that same way for centuries – long before the idea of Bitcoin, computers, the Internet, or even electricity was even close to a reality.

“We see [decentralization] in government: rather than a big central government, we want to have lots of smaller entities where people can try things and experiment, [such as] in a federalist system like in the United States. The point here is that different states have different rules, not so that they can just be different for the sake of being different, but so that they can experiment and try things,” explained Dr. Wright.

“The federal policy implemented within [the United States] was all about having the states balanced with a central sort of controlled government that had limited power. This is the point of decentralization—it is to limit the amount of power than any one person has; that any one group has.”

In illustrating his example, Dr. Wright referenced Federalist No. 10, an essay written by James Madison—one of the Founding Fathers of the United States—as part of The Federalist Papers, a collection of 85 essays written by Madison, Alexander Hamilton, and John Jay (themselves both Founding Fathers) that was published in 1787 to promote the ratification of the United States Constitution by influencing the New York ratifying convention. In Federalist No. 10, which is by far the most well-known of The Federalist Papers, Madison—writing under the pseudonym Publius, deals with the issue of factions and the undue influence they can have over society.

Madison defined factions as “a number of citizens, whether amounting to a majority or minority of the whole, who are united and actuated by some common impulse of passion, or of interest, adverse to the rights of other citizens, or to the permanent and aggregate interests of the community.” Sound at all familiar? Madison’s solution to curtail the influence of factions was to decentralize political power as much as feasibly possible, limiting the functions of centralized government and instead devolving much of the power of legislating to state and local governments.

“The reason that you have a non-democratic system [in the United States], why it is a republic where the people are sovereign, isn’t so that everyone can have a change of everything on a whim. It is so that you elect people who will slow down change; not so that you progress and be progressive for the sake of it, running to the edge of the cliff like lemmings and then running over without looking, without viewing where you’re going,” explained Dr. Wright.

“Progress is fine, but what are you progressing to? That’s a question you always need to ask. Why are you doing this? What are you taking away from? Because every decision that you make, every economic or political change, has repercussions that flow. You should be the person engaged in trade. You should be the one owning your own information. You should be the one determining your life. That’s what you should be taking back.”

Philosophically, this component of Dr. Wright’s talk can be applied to many aspects of life—but perhaps most pertinently, given the speaker, is its relation to Bitcoin. Regular readers of CoinGeek will no doubt be familiar with the history of Bitcoin and how a minority cabal of rogue developers (a faction, if you will) transformed a world-changing technology into little more than a speculative instrument by wielding a disproportionate amount of power to introduce “features” like Segwit and the Lightning Network—rather than following the white paper (in this metaphor, The Constitution) written by the technology’s Founding Father (Satoshi Nakamoto) and scaling the network as always intended.

If only we had learned from the lessons of our forefathers instead of once again allowing, or rather dooming, history to repeat itself.

Decentralization for a better today and tomorrow

Of course, it is not all doom and gloom when it comes to the present state of Bitcoin. The return of Satoshi Nakamoto and the revival of his technology as Bitcoin SV has brought the technology truly back to its original form and function—just as its creator intended—returning the power to the individuals in the system (within the rules and boundaries defined in the white paper and codebase) and allowing innovation to thrive.

“Whether we are talking about politics or anything else, moving things to the edge is always a good idea,” Dr. Wright explained. “It allows for far more experimentation, and when we have experimentation, we have innovation. And when we have innovation, we have growth.”

This is evident in the array of applications that comprise the BSV ecosystem, which features everything from video games and supply-chain tracking tools through to information archives and smart contracts. In contrast, BTC remains what it has been for the past half-decade—a broken, speculative instrument with little more utility than a pet rock.

“We’re looking at a world that is getting progressively better, and we don’t want a world government; we don’t want everything centralized—not for climate and not for European ideas,” said Dr. Wright. “What we want is to decentralize by pushing things out to the edge so that we can experiment. And we can try and occasionally fail, but learn from our failures.”

Whether Dr. Wright would consider walking away from the Satoshi Nakamoto moniker and divesting the direct power he whelmed over Bitcoin a failure is up for debate. Personally, I suspect that had he never been doxed by Gizmodo and Wired, Dr. Wright would have remained in the shadows and kept quiet, despite the clear and obvious power grabs by the new Bitcoin developers and bastardization of the technology he created. What isn’t up for debate, however, is the significant level of misunderstanding that accompanies any discussion of Bitcoin and blockchain technology—including the very reasons for its creation—a common thread throughout Dr. Wright’s TEDx talk.

“Part of the [reason for the] creation of the blockchain wasn’t what people are saying—censorship-resistant money but [rather] censorship-resistant information,” explained Dr. Wright.

“Bitcoin, Ethereum, any of these things, they can all be seized; they can be frozen. But what can’t happen is the [absence of] information of why that happened—it has to be there. If an oppressive government decides to take your money, they can. But first of all, they need to find it, and once they do, they need to make it public for the world. They need everybody, anywhere, anytime, to be able to look at this and see what has happened.”

While issues like erroneously defining decentralization can be covered and corrected in a TEDx talk, proving that the true purpose of blockchain was censorship-resistant information rather than money will take work and time—thankfully, neither of which Dr. Wright is afraid of or unaccustomed to. In fact, just as Dr. Wright predicted, the U.K. has recently introduced legislation which will make it easier to seize, freeze and recover digital currencies like Bitcoin. In addition to the numerous court cases that Dr. Wright continues to wage in the name of proving the true power of his invention, it would appear but a matter of time before he is once again proven right (or is that, Wright?).

Perhaps, it might really be high time to start listening to the man who created this technology!

In that vein, in an effort to set an example of the behavior that I hope to see emulated, I will turn back to Satoshi for the final words of this piece, who offered a message of hope, positivity, and pragmatism, as well as a final affirmation of the benefits of true decentralization, as part of his talk.

“We are in the best time in human history – not slightly better, but remarkably better,” said Dr. Wright.

“When power is limited, when it is decentralized, people can move and change where they live. When power is decentralized, we can try different ideas, and people can see what’s happening.”

“It is only with information that we can act. It is only, as a global community that is knowledgeable, that we can act. And this is only going to work when we push things to the edges.”

Watch: Dr. Craig Wright’s keynote speech: A Better Internet with IPv6 and BSV Blockchain at the BSV Global Blockchain Convention

YouTube video

New to blockchain? Check out CoinGeek’s Blockchain for Beginners section, the ultimate resource guide to learn more about blockchain technology.