Field Note #8. On "Impossibility of Decentralization"

Source: Yujin Kwon et. al., Impossibility of Full Decentralization in Permissionless Blockchains, Advances in Financial Technologies (Oct. 2019)

  • There are two required conditions for full decentralization: (1) sufficient number of independent consensus participants in the system and (2) equal resource power distribution among them.
  • We can tag these conditions as (1) the "numerosity condition" and (2) the "resource distribution" condition.
  • For there to be equal resource distribution, there must be Sybil costs, which exists when it becomes more costly for a party to run multiple nodes on a blockchain vs. a single node.  
  • Absence of Sybil costs removes a cost deterrent in the system, allowing for resources to be gathered by fewer parties with pre-existing means to aggregate resources.
  • The only way to ensure Sybil cost in a permissionless system is ironically through a trusted third party that can verify real world identities (not simply wallet addresses, as multiple unique addresses may be controlled by a single entity), making full decentralization a practical impossibility.
You've successfully subscribed to Sandeep C. Ramesh
Great! Next, complete checkout for full access to Sandeep C. Ramesh
Welcome back! You've successfully signed in.
Unable to sign you in. Please try again.
Success! Your account is fully activated, you now have access to all content.
Error! Stripe checkout failed.
Success! Your billing info is updated.
Error! Billing info update failed.