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The introduction of the Edinburgh Decentralization Index (EDI) ignited discussions about the appropriate methods for accurately quantifying decentralization. Justin Bons was among the early critics of the EDI, arguing that it overly favored Cardano in its results. It’s worth considering the essential features a protocol should possess to enhance its decentralization, and whether Justin’s critique holds merit.
Decentralization revolves around the distribution of decision-making authority. This can pertain to aspects such as block production, governance, or client diversification. As it stands, the EDI primarily provides information on block production, which will be the focus of the article.
The ultimate aim of decentralization is to prevent a single entity or a consortium of influential entities from monopolizing decision-making processes within the network. In an ideal scenario, each participant would possess equal voting rights, akin to the ‘one person, one vote’ principle observed in political elections. However, within the realm of blockchain, decision-making power is tethered to possessing an expensive resource. Consequently, entities with more resources wield greater decision-making power, embodying the principle of ‘more resources, more power’.
A decentralized protocol, unlike a democracy, for instance, possesses distinct attributes. Let’s contemplate the characteristics that contribute to heightened decentralization:
- Inclusivity
- Fairness
- Reliable Block Production
- Resistance to Cartels and Whales
Inclusivity implies that the broadest possible array of entities, including those with limited resources, can partake in network consensus.
This encompasses both initial and operational costs. It could involve purchasing ASIC miners and regular electricity payments in the case of Bitcoin or acquiring ADA coins in the case of Cardano.
If a participant wishes to produce blocks, they must operate a full node and maintain a continuous internet and electricity connection (fail-over solution).
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