Skip to main content

What is the first principle of decentralization?

· 3 min read
NEST Protocol


The decentralized world is not easy to build and understand. And there’s a strict rule, which we propose as the decentralization first principle: in the whole process of value exchange, as long as there is one process that is centralized, the whole process is centralized.

It seems a bit too "cruel" to use the first principle to demand the current decentralized world (no project except the public chain itself satisfies it), so can we lower the standard a bit and classify decentralization according to its degree? Here, we propose several criteria of decentralization, drawing on the effective market.

Strong decentralization

Each step is free from any risk of centralized agency and is fully compliant with the first principles. For example, the public chain implemented based on POW or POS mechanism, the assets written on the chain do not depend on the fact under the chain, such as a kind of ERC20 of NETH, which is generated by paying 1 ETH into the contract to generate a NETH, and paying 1 NETH into the contract to get another ETH. The contract is open source and does not have any management authority. Such assets, which are homogeneous with ETH, do not depend on any offline team, and are decentralized. In contrast, OMG, HT and other assets must rely on the project team to "capture" the value, although they are written in blockchain, but also not decentralized.

Semi-strong decentralization

Considering that the value recognition of the vast majority of assets may contain the risk of centralization, we lower the standard of strong decentralization by disregarding the step of value recognition and only considering the interaction of assets on the chain. Various DAPPs or applications emphasize the decentralized provision of value or services on the chain, so semi-strong decentralization means that the whole process of these on-chain services no longer contains the risk of centralization. For example, ERC20 is semi-strongly decentralized as a service itself; in addition, the fully open-source NEST lending contract is semi-strongly decentralized. In short, the only difference between semi-strong decentralization and strong decentralization is that the only risk of centralization in the entire process of value exchange is the source of value, while the rest of the process is completely decentralized. There is a common saying that once a thing is on-chain, it is completely decentralized, so semi-strong decentralization preserves the risk of centrality in the on-chain step, but does not add additional risk of centrality.

Weak decentralization

Regardless of whether the source of value is decentralized or not, there still exists some steps in the whole process of completing the value exchange through voting, multi-signature, and decentralized nodes, which is called weak decentralization. Weak decentralization is not a further weakening on the basis of semi-strong decentralization, but it means that even if the native asset you use is ETH, it is still weakly decentralized with solutions such as voting, multi-signature, and decentralized nodes in the process of value exchange. So weak decentralization emphasizes the risk of some kind of semi-centralization in the on-chain interaction process. For example, Chainlink, which uses a variety of decentralized nodes to provide prices, is itself weakly decentralized because of the possibility of cheating with that kind of decentralization (many people emphasize collateral, and collateral is a guarantee that the cost of cheating is not the possibility of cheating).