Decentralization: dispersion of functions away from a central authority.

Every system has some degree of decentralization but perfect decentralization is neither possible nor useful. Like gravity, central authority will tend to claw dispersed functions back, if for no other reason because such a formation increases efficiency. One reason to purposefully become less efficient through decentralization is that more centralized systems can be more prone to failure. Many think Bitcoin’s most centralized counterparts have already failed at performing their functions of money issuance and transaction processing.

The act of clawing back authority can come in any myriad of forms. These are “threats to Bitcoin”. Bitcoin strives to be immune to the external influence of governments and corporations and Bitcoin is vulnerable to technical threats such as the 51% attack.

To become more decentralized than any potential threat is inefficient and unnatural. What is the maximum potential threat we should direct our decentralization activities toward protecting us from? Brainstorming here… an attempt by the USA to fatally disrupt our network or market by any means possible?

Horizontal Decentralization

When Bitcoin’s decentralization is usually discussed this type of decentralization is what is referred to, technical decentralization. Although extremely hard to qualify, things like hash rate, hash rate concentration, node count and so on, factor in. Ignoring the Internet as a whole, is Bitcoin the most robust, decentralized pure-software system that we know of?

In 2011, Dan Kaminsky claimed Bitcoin’s decentralization was all pretext, it could never handle the projected traffic without centralizing itself out of recognition. Gregory Maxwell replied Bitcoin’s scalability is an adjustable property. It can go from Google-farms-only on one extreme to 1MB blocks on the other. On his way out, Satoshi slammed the dial all the way to the right, leaving it to us to figure out where to go from there.

On the horizontal axis the question, “How can we make Bitcoin more decentralized?” is correlated with “How can we make Bitcoin more costly and inefficient?” Every answer to the first question is a valid answer to the second.

Some say decentralization is the feature that sets Bitcoin apart competitively. But technical decentralization has no intellectual property that puts Bitcoin in a favored position. Although it takes work, the nuts and bolts of getting decentralization working on this axis are not particularly challenging. Especially given Bitcoin’s ground breaking experiences, which it has shared freely with the world.

How many full nodes, what amount of hash rate and what amount of mining decentralization is required to protect Bitcoin from an American full-frontal assault? I’d like to hear your answers but I would have to say no amount is enough, especially considering the market and legal shenanigans the USA could get up to. Therefore, maximizing decentralization on this axis does not protect bitcoin from the maximum threat.

Not to be dismissed, decentralization on this axis is both necessary and extremely powerful, especially against technical threats. Many of Bitcoin’s nearest competitors will only pay lip service to technical decentralization. It remains to be seen how well they fair. Do threats require us to keep the dial tuned in at 1MB to maximalize decentralization, what are the chances 1MB turned out to be The Magic Number? Being able to run a node on users’ generally available hardware is one technical decentralization threshold that seems to frequently come up. The tool must fit the job.

Vertical Decentralization

This is abstract decentralization. These are hearts and minds, bitcoin users making consumer decisions, integrating bitcoin into their businesses, and maybe a couple of them even vote. These people understand the Bitcoin ethos (if there is such a thing) and they are integrated in society. Some say maximizing decentralization on the horizontal axis (as a settlement layer) will not affect potential on the vertical axis. I’m not sure how that view can be supported — being more costly and inefficient than necessary is not a good selling point to the masses.

The fantastic thing about vertical decentralization is that it comes at no real costs. It is hard to say integrating on this axis is inefficient. Quite the opposite, it is synergetic. From this area is where Bitcoin gets its value.

The other fantastic thing is that it is the only form of decentralization that has any hope to protect us from an American attack. Maximizing decentralization on this axis, Bitcoin becomes so integrated and pervasive that governments wouldn’t dare offend their citizenry by attacking it. Over time the central authorities we fight against, if they survive, will become integrated with this permissionless, borderless protocol we built.