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What are the defining properties of a blockchain and why can we draw an analogy to ants?

If we think of a single ant, we can conclude that it cannot achieve all that much by itself and after a short while looking at it, most people would get bored. On the contrary, an ant colony in action would spark a strong sense of fascination in most of us.

Sophisticated communication mechanisms allow the ant colony to make efficient decisions, solve complex problems and build a secure nest. These properties are not inherent to a single ant and are thus not directly derivable from its DNA – they are determined by the ant colony as a whole.

Consequently, we can differentiate between intrinsic properties and emergent properties that become apparent through the parts forming a system.

A blockchain is more than the sum of its parts

Just the same way ants are an element of the strong and complex colony, a node is the core element of a blockchain network. The DNA of a node, its program code, does not automatically make the data on the blockchain valid, “tamper-proof” or censorship resistant. Characteristics which are mentioned in almost every article explaining blockchain, even if what is talked about are enterprise blockchains. However, it is only through a network of hundreds or thousands of nodes, that properties like security and manipulation resistance emerge.

“The whole is more than the sum of its parts."
— Aristotle

Furthermore, it needs to be stated, that blockchain does not equal blockchain. At every blockchain’s core sits a protocol that determines which transactions are valid and can be included into a block. Every block producing node must stick to these rules and check for example whether Alice’s account has the required balance to send amount X. This protocol is commonly known as consensus mechanism. Yet the blockchain’s properties are not solely defined through the programmed consensus protocol but more so through the system’s overall architecture and how the network of nodes is composed. Specifically, the properties are often determined by the blockchain’s permissioning design.

Of private and public blockchains

We can distinguish between permissioned and public permissionless blockchains, yet it shall be noted that various hybrid forms exist.

Public blockchains are open to anyone, anywhere. To join the network a user would only need to run the client software which starts the blockchain node. What follows is the local synchronization with the current state of the blockchain. Past blocks and transactions are being downloaded, re-executed and validated. Depending on the consensus protocol in use, the new node may now start ordering transactions and propose new blocks.

The protocol omits the necessity to trust other participants, which thus can be anonymous. Honest behavior is incentivized with rewards and malicious behavior penalized. These crypto-economic incentivizes gives us certain guarantees that transactions and account balances are correct. If a miner (or validator) attempts to write manipulated transactions to the blockchain and gets caught, they will incur significant financial loss. These incentives are the main reason why public blockchains need a cryptocurrency. And furthermore, the security is function of the cryptocurrency’s value . A blockchain worth 10 billion USD is generally speaking more secure than a blockchain with the same technology and a market cap of 200 million USD. The higher the value, the higher the cost of attack.

In contrast to that, private or permissioned blockchains usually employ consensus mechanisms different from their public counterparts. Only certain entities can join the network and interact with the blockchain. The data is not publicly visible. Here participants establish contractual relationships that guarantee a certain level of trust. This is why a cryptocurrency within such system can be omitted and is merely optional. Often used in an enterprise context, the company or consortium operating the system thus has a major influence on the blockchain system’s properties. Since the total number of nodes in such a context is oftentimes in the order of a magnitude lower, the overall security guarantees can be assumed much lower. Provokingly, you could ask yourself if you would rather have 20 ants in charge of building your nest or 5,000.

Decentralization is blockchain’s key ingredient

Decentralization and blockchains are two intertwined concepts where one really powers the other. Some people even audaciously claim that a blockchain with restrictions to join is not a real blockchain. The permissions and the aforementioned example of fewer ants have something in common: they determine the degree of decentralization.

But what does decentralization actually mean? The term became quite popular over the past years and plays a major role in politics (federalism) or in energy production (smart grids and distributed energy resources). The internet and the world wide web are quite decentralized, yet that decentralization is diminishing.

In the world of blockchain and distributed ledger technologies (DLT) the notion of decentralization is ubiquitous and significantly influences costs, transaction (computation) throughput, security and privacy. Ironically in the blockchain world no consensus exists on how the term decentralization is defined.

From distributed to decentralized

It was around the 1980’s when the concept of distributed computing emerged in the field of networking and especially today it can be considered a crucial technology. Distributed systems are utilized in cloud computing or in video streaming services like Netflix, often in the form of content delivery networks (CDN). It does not require much technical expertise to comprehend that not all of YouTube’s videos can be stored on a single server. Distributed NoSQL databases such as Apache Cassandra make data more resilient and allow for a reduction in latency by distributing the data through various geographic locations.

Blockchains themselves can be somewhat considered a special type of distributed databases. Databases that are built on cryptography and that store their own history. However, when compared to conventional distributed databases they enable a pivotal feature: decentralization. Even though the immense amounts of data and computational power required for querying the Google search engine is split among thousands of servers, the machines are managed by a centralized consensus protocol. You could imagine a robot dictator that determines the correct state of the databases.

Usually, when we talk about decentralization in conjunction with blockchain what we mean is a political dimension, and that aspect correlates with the ability of any party to capture the system. The degree of decentralization is a defining characteristic influencing various metrics from speed, costs per transaction, security or how little trust may be required. It also shapes the governance process and future development of the system.

Decentralization is a spectrum

In the context of blockchains, decentralization is not either on or off like a binary switch that is set to 0 = centralized or 1 = decentralized. It must be understood as continuous spectrum. As a matter of fact, even among public permissionless blockchains you can find various degrees of decentralization. Both Ethereum and Bitcoin, the two most famous and valuable blockchains that all other blockchains are being compared to, are free to join and are thus permissionless. Their consensus mechanisms were once starkly decentralized, however, those days are long gone. Today the immense concentration of computational power required for the proof-of-work to create new blocks makes it infeasible to take part in the consensus with a consumer laptop. Now there are basically just few mining-pools that control the network. Other public blockchains like EOS use a mechanism that delegates consensus to a mere 21 nodes. This makes the EOS blockchain quite fast yet renders it centralized and thus prone to capture. Likewise, it can be stated that private or consortia blockchains are much more centralized than their public counterparts and thus less secure.

Since there are certain trade-offs when choosing a platform to build upon, it needs to be evaluated in detail which attributes are most desired. You could argue that perfect decentralization is a utopia, a desired state than can never be fully achieved.

Decentralization is an emergent property that depends on the consensus protocol and the composition of a blockchain’s network with its nodes. Decentralization is what differentiates blockchains from traditional databases and should always be considered as blockchain’s greatest value proposition. Decentralized systems like blockchains change how we coordinate, how we transfer value, and how we evolve as a society.

And by the way, next to the emergent system properties there is another similarity to ants: the processes in an ant colony are decentralized, too.