Let’s take the US dollar and bitcoin as examples to understand the concept of decentralization.
The United States government has full control over the US dollar and can create new notes whenever it wants. They can also determine how banks distribute them and even monitor and restrict the use of currency around the world. Therefore, the US dollar is a centralized currency.
While in the Bitcoin network, no individual or organization can voluntarily create new Bitcoin tokens or decide how they are distributed or monitored. The Bitcoin consensus mechanism, which involves various entities or nodes, controls the creation and distribution of new bitcoins.
But true decentralization is moot at this point. There will always be some level of centralization regarding scalability or security.
However, as the difficulty of mining increased thanks to an influx of new miners, high-end computers were needed to mine new blocks. Only a select few had the pocket size to purchase such systems and manage their extremely high operating costs. Thus, the mining market has been captured by certain mining groups. These few large mining pools have a greater influence on the network than regular users.
Many blockchains have encountered similar issues. However, a handful of blockchains have maintained high levels of decentralization through innovative technologies and mining methods. We have listed some of them below:
In this model, anyone can become a Validator, also known as a “Baker” on the Tezos network. However, to become a baker, you must wager a minimum of 10,000 XTZ, which is the native currency of the Tezos network.
Any baker can suggest changes, additions or upgrades to the blockchain. If the proposed change achieves 80% agreement (known as a supermajority), it is automatically implemented on a Tezos testnet for 48 hours. If things work out without any issues, the changes are implemented on the Tezos mainnet and will be up for re-voting.
Users who do not wish to become bakers themselves but wish to participate in the governance of the blockchain can delegate their stake to a baker of their choice. The best part is that delegators don’t have to give up custody of their XTZ to participate in the delegation.
This system allows the community to avoid any major disputes or the emergence of factions that could hinder the development of the network. It also minimizes the dilution of small token holders and ensures that everyone has a say in the governance of the blockchain.
IOTA is less a blockchain than a system of nodes that confirm transactions. This node system is part of a proprietary technology known as Tangle. The technology mimics the blockchain’s ability to execute transactions securely but blocks and undermines.
Instead, each new transaction is validated by approving the previous two transactions from another node. This innovative approach ensures that the size and speed of the network will be directly related to the number of people using the platform at any given time. This makes it infinitely scalable and extremely decentralized.
QuarkChain Network (QKC)
The QuarkChain network is a permissionless blockchain architecture that uses blockchain sharding technology to implement scalability and true decentralization. The network also provides 100,000 transactions per second (TPS) on-chain.
Sharding allows the various functions of a block in a blockchain to be performed in several smaller blockchains within the main blockchain. These smaller blockchains are called shards. The network achieves decentralization through collaborative mining. Miners can choose to mine shards or the root chain and do it directly without joining mining pools.
Elastos describes itself as “the internet of the future”. It was created to be a decentralized version of the internet powered by blockchain.
Elastos uses sidechains to achieve full decentralization. Sidechains offload processing from the main blockchain. These sidechains perform computation, data management, and integration with the main blockchain for critical transactions and authentication.