Bitcoin Talk: Decentralized vs Distributed

Many people believe that the words “decentralized” and “distributed” are synonyms—but they’re not regardless of what the Bitcoin talk to date has lead you to believe. To be decentralized means to not be controlled by a single entity; to be distributed means to be spread-out.

Although the Bitcoin white paper does not use the words “decentralized,” it refers to the idea of decentralization when it says, “Commerce on the Internet has come to rely almost exclusively on financial institutions serving as trusted third parties to process electronic payments…What is needed is an electronic payment system based on cryptographic proof instead of trust.”

A trustless system, or a system where trust is established via mathematics rather than through an established entity, is a decentralized system; a system where there is no single entity in charge, facilitating what can and can’t happen. And a trustless system can—and does—exist in Bitcoin, but for it to be successful, the network participants need to be operating on the same playing field and playing by the same set of locked rules—this is where the distributed network comes into play.

The Bitcoin whitepaper uses the word distributed two times, both are in reference to a “peer-to-peer distributed timestamp server to generate computational proof of the chronological order of transactions.”

But for the peer-to-peer distributed network of nodes to legitimately create the timestamps mentioned above, everyone must be playing by the same set of rules, especially if there is no central authority. The network validators need an unchanging set of rules because they need to know that the system they are continually working to validate will not transform into a new system that they are not configured to validate or unaware that they are validating—and this is why the protocol must be set in stone.

Why miners and creators need an unchanging protocol

Miners (nodes) are an interconnected network of rule enforcers, and they should be able to reach consensus without discrepancies. When it comes to following the longest chain and accepting it as valid, miners have mechanisms in place to enforce what is true and what is false. But when it comes to playing by the same rules in a decentralized environment, there are no programmed rules that enforce the continuity of the ruleset—and that is why miners on the various airdrops of Bitcoin have lost their way. 

Over the years, software developers began creating and enforcing new rules on both the BTC and BCH networks. Inadvertently—or maybe purposefully—this changed the playing field and broke the set of rules that miners were playing by. Although the miners do the same work they have always done to validate transactions, broadcast them to other nodes, and reaching consensus, they end up doing those actions for a chain that has changed from the chain they were originally doing those same actions for, maybe even to a point where the chain is not the chain they signed up for. The unilaterally contract that Satoshi offered the miners was broken by the BTC airdrop in August 2017 and then again in November 2018 by BCH.

Keep in mind, Bitcoin is supposed to be trustless as it is described in the white paper, and there are ways to reach consensus in a decentralized system. However, those methods do not rely on core groups of protocol developers making the decisions for everyone who participates on the network. However, in the case of the BTC network, the BTC Core Devs are behind the wheel and they make what would otherwise be a decentralized network, a network with a leader, and a trusted third party that can—and does—make changes.

The bigger problem with a changing set of rules becomes obvious when you are trying to build on a foundation that is forever shifting; this results in there being zero certainties in regard to your creation lasting into the future. This makes it practically impossible to build an enterprise business solution on a chain that is continually undergoing upgrades, whether they be soft forks or hard forks. The changes made to the protocol can invalidate any of your previous work done on the chain—which is why you don’t see any serious businesses building a solution on BTC, BCH, or ETH.

For a tool like a blockchain to experience growth, especially growth by way of new tools, resources, and enterprises building on top of it, then the blockchain needs to remain stable and unchanging. Take the internet for example, the internet is successful because it experienced an abundance of growth that came from individuals and corporations finding innovative ways to use it. That being said, individuals and corporations were able to do this because TCPIP (the internet protocol) has not been changed since 1981! This allowed individuals and enterprises to confidently build for the future knowing that their work would stand the test of time, or at the very least, remain standing as time goes on.

The only blockchain protocol that is unchanging, trustless, and has the most similarities to Bitcoin the way it was described in the whitepaper, is Bitcoin SV (BSV). On BSV, the rules are set in stone, and Bitcoin SV miners enforce that stable ruleset; thanks to the Genesis Protocol upgrade, you can build on the BSV blockchain with confidence, knowing that your apps, platforms, services, and solutions will remain standing as time goes on, just like those who build on TCPIP.

Bitcoin is supposed to be both decentralized and distributed

When we zoom out, we see that most blockchain networks are distributed; most have node operators located around the world. But zooming out also shows us that many blockchain networks are not decentralized, many aren’t trustless, and many have implicit trusted third parties acting as fiduciaries as they make critical decisions that affect every interaction on the network.

If a blockchain network has a captain to its ship, an entity that network changes have to go through, and an entity in charge that can be seen as a gatekeeper, then there is a trusted third party in the equation. And these trusted third parties also have liability to others for the decisions they make.

If the rules that node-operators follow to reach consensus change, or rather, the rules of the protocol that node-operators think they are working toward achieving consensus on change in a way that their proof-of-work is going toward a different system than the system they were giving their proof-of-work to on day one—then the network probably isn’t trustless in the truest sense of the word.

Unfortunately, many blockchain enthusiasts today no longer care about decentralization, distribution, and the longevity of a business model. Today, a market-problem exists where individuals and businesses believe there is more value in investing in or creating a short-term money-making coin or token than there is in creating a business with a long-lasting future. 

But at the very least, knowing the difference between decentralization and distribution, as well as knowing what makes a system decentralized and distributed, should bring the world one step closer to understanding what makes Bitcoin, Bitcoin.