Deciphering Decentralization | Chains, Trade-Offs, and True Decentralization | Ep 9

🎧 Curious about the buzzword 'decentralization' in the crypto world? The latest episode of the Sugarcane Podcast dives deep into what makes decentralization the backbone of blockchain. Learn about its spectrum.

🤔 What is Decentralization?
📊 Bitcoin: The OG
🌈 Ethereum: The Evolving Giant
⚖️ The Trade-offs
🐜 The Ant Analogy: A Natural Perspective

Links: 🔗 Website - Podcast - YouTube - Twitter - Discord - TikTok

Disclaimer: 🚨 The information provided across all of Sugarcane's communication channels is for informational and entertainment purposes only. It should not be construed as financial or investment advice. Consult with a financial professional before making any investment decisions.

Chapters

• 0:00 Decentralization in Blockchain Networks
• 8:41 Decentralization and Blockchain Explained

Transcript

Sheldon: 0:00

You're listening to the Sugar Cane podcast, where you get all of crypto's tastiest tips.

Rudy: 0:07

Here's your hosts, sheldon Trotmouth and Rudy Dogum, and we're live on the Sugar Cane podcast. It's me, Rudy.

Sheldon: 0:15

Yep, and I'm Sheldon, the founder CEO of Sugar Cane.

Rudy: 0:18

We're here for another week for more information, and this time it's about something that we take very seriously and we love so much, and it's the essence and core of why blockchain is so amazing it is decentralization. Nice, sheldon, when you first heard that blockchain was decentralized, what was your initial thoughts and feelings towards that word in a technical sense?

Sheldon: 0:48

So first of all, I was like what did I even mean? Like that sounds like a very fancy word in a space that doesn't really make sense. And then I was throwing on like we're not going to have centralization, like what is that? Why does that even matter? Right? So for me, it was definitely one of those situations where I was like this makes absolutely no context hearing it, but once you dig into it further, it makes a lot more sense than really like understanding why it matters. It's very important, and so I think that's why we're all here.

Rudy: 1:14

So, yeah, yeah, and it's what brought you. I mean, for me it didn't make sense, because I'm like how do you build anything that's not through some type of entity controlling and working on it? It doesn't. It didn't register for a while, and then I recognized the power of the internet and the power of communities and how, oh, if people just get together to build something, it can happen. And that's what a company is. It's just a group of people who can build something together that's organized by a CEO or BCs or something like that. So decentralization and crypto it's the big word means a lot, taken very seriously in Ethereum, taken very seriously in Bitcoin and taken seriously in other projects. But there is kind of like a scale of what decentralized means, and I want to start with how decentralization works for Bitcoin. The OG share with me.

Sheldon: 2:22

Yeah sure, tasty tidbits, yeah, no. So this whole idea of decentralization, as you said, is a spectrum. So at the very, very far, let's say, left end, you have a company and it's one entity. It's run by a central group of people the CEO and the kind of board of directors and, like people who are working with that company, they're very focused on one specific concept. It's one company, one entity.

Sheldon: 2:47

On the other end we have that OG Bitcoin concept, where it's completely decentralized and in the context of Bitcoin, the way decentralization works is that there's a number of people around the world that essentially run technology or run nodes that support the Bitcoin network. So what that means is that they all have their own computers that each of them basically build upon and contribute to the network and support the network. And so if there's ever a situation where, let's say, one part of the world, let's say the United States, goes down, like that network of the internet goes down, there's other parts around the world that actually can keep the load up and keep the system running. And so, from a Bitcoin perspective, it's just this fact that everyone's essentially geographically separated that really makes it stay stable.

Rudy: 3:36

Yeah, and that's the thing too, is with, especially, money. That's what kind of cryptocurrency is at its current state and developing into a much more complex technological revolution. We'll stick with just this little topic for today. That money is currently controlled by our governments. That's who controls it and that's who says I guess the value is after they do their calculations of GDP and economic stability. So with this, this is a piece of technology that everyone in the world anyone in the world can access, view, see and propose to edit. So therefore, me as an individual, I can actually go to the Ethereum repository, their development repository, and say I think this should change in this way and I know how to solve it, and this is why I propose. And then a community of individuals will come in and say, hey, this looks like a good idea or looks like a bad idea, and that's kind of how it works at its very high level overview, and that sounds great. But I definitely want to know what are some tradeoffs for decentralization.

Sheldon: 5:05

Yeah. So the big tradeoff that you end up coming into with centralized systems is just speed. So with the central company you have a pretty strong mandate from top down, like the CEO or the company who are running the company. They say, hey, do this thing and it's done. And it's very much top down control. You can move really fast. That way there's not as many barriers to getting stuff done or communication, just because everyone is pretty much all in the same place. They're all in the same chat group, slack channel, office even.

Sheldon: 5:34

But in the concept of decentralization and decentralized networks, you have a number of different teams that also are around the world that are building towards this kind of system, and so you have to do a lot more coordination, a lot more cross-team communication and things just move slower. To be honest, for example, ethereum it's about eight years old at this point and so in the eight years that it's been around, it made its most largest update about six months ago, so in November timeframe around last year we were going to move from before work to before stake and that really was a combination of six years of work just to get that one large update through. But if you're in a team context that worked at a company. You move that through much quicker. That's just the speed. That is really the big drawback when it comes to the decentralized systems and decentralized teams.

Rudy: 6:24

Yeah, that's, that's that trilemma that everyone speaks about, right, about decentralization. It's the security, scalability and decentralization. So it's a tough thing to master because you do have trade-offs and it's not that simple Like, oh, decentralized is great, but, yeah, it's a little bit slower to get things accomplished, but it's also a little bit more secure because there isn't one man or one person to that can make the whole thing fall. If the CEO decides to make a change, even against their team's advice, that can hurt the entire company, where, in this instance, the majority matters and it's much more of a decentralized format. And, to give some context, when someone says they are decentralized, they're decentralized blockchain, decentralized cryptocurrency. How can we actually look into that and see that they are true to their word.

Sheldon: 7:32

What do you mean by that In terms of blockchain networks? You're talking about teams or what's your context in that Blockchain networks? Yes, there's a couple of different metrics you can look at, like decentralization. You can look at what it takes to run a node. What I mean by that is get a bit technical here Ethereum. You could essentially run that on any computer, even like a Raspberry Pi, If you know about Raspberry Pi there are little small chips that you can actually run simple programs on.

Sheldon: 8:06

You can run a full Ethereum node on a Raspberry Pi. But as you get to get a step further, bitcoin itself is a bit more complex. You need a bit more computation behind that and you need what's called ASICS. These are actual chips that are built for running Bitcoin nodes. Those are pretty expensive. You can actually buy them, but at scale the large people who are running Bitcoin nodes they have full warehouses full of these ASICS that push much money into server cost and AC cost just to keep the system from overheating. That's a step further from a Raspberry Pi to now an ASICS.

Sheldon: 8:41

Then, even taking a step further than that, there's another blockchain called Solana. Their whole premise is that you need to run high-performance computers. You have really strong computers that you can do quantum computing on. These are really performing computers. The cost to even buy one of these things is exorbitant, so it's really expensive to even get one. The actual infrastructure to run it is also pretty complex. Not just anyone can run a Solana node. For that reason, I tend to find that it clusters around small group people, small number of people who are running Solana nodes. But then as you get further down, I get back down to the spectrum to Bitcoin and Ethereum. Ethereum is definitely geographically decentralized. Anyone in their house can run it, and so it's a lot easier for most people to run it. So there's a lot more nodes in the Ethereum context.

Rudy: 9:31

Yeah, that makes sense, because when I think about decentralization, I think about how easy is it for any person to contribute and access and I'm curious, speaking about Solana, that seems very difficult and I don't think I can afford that. And for Bitcoin, it seems feasible. Yeah, it's intensive in terms of having this computer that runs and make house, takes a lot of energy and it's pretty much like a heater in my own home and Ethereum used to be that way too. But that's why they made that conscious effort and group collective effort to change into proof of stake where you can kind of just run a little computer that is pinging back and forth between the internet but not running any hard computations on the actual device. And it's becoming interesting because with Bitcoin, it's very competitive too.

Rudy: 10:32

Now, the more of these computers you have, the more you can do, more proof of work you have, which is good for people who are wealthy and can have a huge, massive system. Thankfully, it's been out long enough where it's diverse enough around the globe where it's still almost impossible for someone to do any malicious interpretations to the Bitcoin network. Same for Ethereum. It's pretty graphically diverse and also anyone can always start hopping on and if you want to follow someone who's into eithstaking. Follow SuperFizz. He's a great guy. But that whole eithstake community huge and very educational, very helpful.

Sheldon: 11:16

I should even dive into a point you just made about the way that Ethereum network runs and the way that Bitcoin network runs and how Ethereum transitioned from what Bitcoin is to what is kind of a new model. We're definitely going to dig into it more, about the proof of stake versus proof of work and how those two different types of algorithms matter and how they can impact what type of hardware you need. But in the context of Ethereum, since it is what's called proof of stake, it doesn't need as intensive of hardware as it actually runs, so it actually allows people to have a lot lighter kind of technology to actually run it.

Rudy: 11:58

Yeah, I don't know if people know this, but the goal for like Ethereum is to actually be able to stake on your phone. Everyone can just stake on the go on their phone. It's not. It's supposed to get lighter and lighter and lighter as time goes as we continue to develop. It's supposed to be everywhere and quick. All that once.

Rudy: 12:17

I'm excited for that future, because that's what I want. I want as much diversity as possible, because it is a serious risk when there is only one service providing a node, because then that service is technically in control. So if you look at a Macbook, you know, yeah, there is only one kind of Apple and one kind of Mac. I mean obviously different models, but Apple controls it all, whereas if you look at Android or Windows, they provide a software but there's a variety of different hardware that you can use with it and even with Android's case it's open source so you can manipulate it as you want to fit your needs. So it's actually a little bit. That's a little bit more of a decentralized model, but still, you know, decentralized entity still control the whole thing. So it's still hard to compare that. It's kind of hard to compare like anything, to decentralization. I'm like what's this? Nothing is decentralized. Everything is centralized in some way, except for crypto. I got an example.

Sheldon: 13:25

This is a bit weird, so let me run with it. Yes, let me know if it makes sense at the end. So if you think about ants, right, like, like ants, like in a colony. So the reason I bring up ants is because ants can be thought of as decentralized, because, like, it's not so much about the actual individual ant living on to propagate, to carry on, is actually about the whole nest and hold the hive, actually being able to carry on. And so if you were to take out a part of the hive of a nest colony and we have an ant colony, the rest of the rest of the ants can actually still come together and actually be resilient and still push forward. And so the idea of like decentralization is kind of like thinking of the whole network of the internet network, of like watching networks, as a set of ants that all live in different locations, that like, if one of them, if a bunch of them, were to get taken out, the whole colony can still live on. So how's that sound?

Rudy: 14:22

I mean it's legit because you're right, we are going back into our like ancestral, like instinctive, animalistic, like instinct of working together as a hive, rather than having a queen bee who controls the whole entire hive. So it's pretty interesting. But yeah, I like the analogy and we'll leave it at that, the ant analogy. I want to go back home, tell your friends exactly how it works, saying you heard it on sugar King podcast that she'll have said this is how decentralization works. Block chains are ants.

Sheldon: 15:04

That's it. It makes sense, so I'm going to stick with you.

Rudy: 15:12

Yeah, thank you everyone for the other awesome week. We're getting definitely more and more technical into these episodes. I'm enjoying it a lot, so, except for next week.

Sheldon: 15:23

Yeah, with the tastiest of tidbits.

Rudy: 15:27

Peace around.