With the direction that these governments are heading as far as the world of crypto regulation, and beyond, decentralization is more important now more than ever before! Goblin Gensler came out this week and said that because the majority of Ethereum transactions are mined in the US, that Ethereum basically falls completely under their jurisdiction.
This is extremely scary, and if you aren't shaking in your moon boots, you should be. This opens up the door for governments to start going after blockchains that have locational centralization. This is very concerning with Bitcoin as well. As the US gains more and more hashrate, this could through the organized crime syndicate, I mean the US government into action against the so-called "digital gold". Let's talk about some different types of centralization for a bit as I see things.
This is obviously what we are seeing with Ethereum and this move from the Goblin. A country that wants to try and claim geographical control because of the number of servers in their location, can really take over and do as they wish, and who can stop them? Well, simply the validators themselves. They can move their servers to different countries. Not so easy if you are physically running your devices, but it's pretty widely knows that many networks still run on AWS or companies like Hetzner, which we will discuss later.
If you are a validator renting servers from different data centers, it's important to choose different locations, and VERY important to make sure these nodes are not ran in the US, who is obviously targeting blockchains with geographical centralization. This is why it is important for people all over the world to be involved in running nodes on PoS chains, as well as we need more individual miners and mining operations in more places across the globe.
We have seen the consequences of governments trying to shut down miners, uh hem, China... We all know what happens in these cases. In their case with shutting down mining in their country, actually was great for geographical decentralization. The one big issue is a lot of miners moved to the US, which has started to centralize the hashrate here. Circling back to the Goblin's move with ETH, this is worrisome for Bitcoin.
Data Center Centralization
This is another problem with a lot of validator nodes is the centralization of data centers or hosting companies. It's a well known fact that many blockchain nodes for different chains are all ran in some of the same data centers. AWS and Hetzner are two companies that are known to have a lot of blockchain infrastructure running on their servers.
AWS is an American ran company and we can see where the problem is there. Unfortunately, we no longer live in the land of the free, but in the land of the over-taxed and regulated. At any given moment, AWS can order the shutdown of any blockchain-related node.
This has already been seen recently with Hetzner out of Europe. They recently had a come to Jesus with their terms of service and the many nodes that are running on their infra. Apparently, according to them, and their vaguely worded ToS, basically lost a lot of business as they have ran off many of their blockchain related customers. Many validators have not moved, but I do know they are actively monitoring traffic of different servers and will eventually terminate nodes for violating ToS.
For instance, I know that for my Hive Engine witness node, I am running it in a data center in Germany, with my backup being in a different physical location than the main node, but I also know I am only 1 of 2 witnesses using this particular data center. Even after Hetzner's issues, they are still the data center that holds a majority of the Hive Engine nodes.
Miner and Validator Centralization
This is a huge issue on many blockchains. There is this thing called the Nakamoto Consensus which basically measures how decentralized different blockchains are based on how many nodes are running and how many it would take to halt the chain or perform a 51% attack. Many of the Proof of Work chains are still fairly decentralized, but most of the proof of work networks on the other hand, are EXTREMELY centralized at the top of the consensus chains. Yes, including Hive.
Yes, there are over 100 different witnesses, but the chain is managed by the top 20, so if they get together and decide to do something, like, I don't know, freeze someone's funds, who is to stop them? All it takes is 17 nodes to come into consensus. We found this out the hard way.
Hell, let's just look at Ethereum or other EVM chains. Most of those chains are centralized to just a few of the top validator nodes. The centralization on Ethereum after the merge is just gross, and makes me want to avoid it, especially now that they are in bed with the governments and the World Economic Forum... Just look up Joseph Luben on the World Economic Forum's website. Makes you not want to touch Ethereum ever again. If fact it makes me question the validity of the industry as a whole. How many other older, bigger players in the space are bought and paid for at this point? Probably too many to count.
Then let's not even get into the other chains that are managed by a centralized foundation or exchange, yes, I say this even as I build things using Binance Smart Chain, but I am using it as a second layer to Hive really, haha. It's important that if you are going to use centralized services, you do it in a way that it can be hard to shut down like that. Make it a game of whack-a-mole. We have to develop faster than they can regulate.
BYOB- Be Your Own Bank
The best way to fight centralization, every crypto enthusiast should look at running their own nodes if they have the ability to do so. Isn't the concept of being your own bank not what crypto is all about in the first place? I know that it just isn't feasible for many people, but there are ways to do it. I currently have a physical Bitcoin node running at my kid's place on a Raspberry Pi and external hard drive. Just sits in a corner and helps run the Bitcoin blockchain. Low power, low data needed, well after the initial blockchain is downloaded of course.
Your best bet these days is Monero. Anyone can mine Monero. Monero is the premiere privacy coin and is the one I am currently stacking because that makes my wealth (what little I have left after the crash, haha) untraceable. Monero is mined on a CPU, which I can even mine on my Macbook Air with the M1 chip. Pretty cool. So when people say they can't support networks, it's because they just don't want to. Excuses, excuses.
Most proof of stake blockchain nodes are MUCH harder to operate from home, which is where these data center issues come into play. You have to have your own, extremely expensive, internet and server infrastructure. This can also be solved with co-location opportunities if you have a good, independent data center in your area.
In the end, it's up to you, me, and everyone else out there to make these blockchains as decentralized as possible. Just buying a token is not enough, look into what you can do to help make these networks more secure and resilient to take down!
Until next time...
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Posted from my blog with Exxp : https://coin-logic.com/why-decentralization-is-more-important-now-more-than-ever-before/