Decentralization: Authority vs Consensus
Decentralized systems such as blockchains allow for cencorship resistancy and minimize trust between parties, with no central authority.
When a single entity owns all the control over an application (application can be anything here; computer applications and cryptocurrency, etc.), this makes the application centralized. One central entity (authority) rules everything. The users of the application have to trust the central entity. The authorities can change the rules of the application anytime without asking anyone, and censor whoever they want. Since we are here for open finance, we can give a real life example from the banking system. When you use a bank, it decides whether you can open an account or whether you can make a transaction or not. They decide whether they freeze your account anytime or not. This is simply an enormous amount of power which in turn can be used maliciously very easily. Some will say “But what about illegal transactions, we need central authorities”. The term illegal is a gray term, illegal according to who and where? In some countries, it is illegal for a woman to drive a car. An Iranian citizen wants to open a bank account in the US but it is not possible, it is illegal. You cannot send money to your loved ones because they live in a country which is embargoed. Many more examples can be given, but the main message here is that centralized power will always be used selfishly, it is almost impossible to avoid that.
The only solution is decentralization. The power needs to be distributed to everyone in the system. We need to get rid of central authorities for a better society. We need to promote autonomy instead of authority. Until 2008, we did not have a proper solution or tool for that. But Satoshi Nakamoto came up with an idea and software named Bitcoin, which changes the definition of trust. It distributes the power to everyone using a “database” with the addition of hash and signatures (also known as blockchain), open consensus mechanism, proof-of-work (PoW), immutability, and a native asset that creates a very complex game theory. The whole system is so perfectly designed that there are rules but there are no rulers. The rules can only be changed if and only if a major consensus happens. Since it is immutable and no one controls it, it is also resilient to state-level attacks. A government intelligence agency has no one to ask to censor the transactions because no one controls the system.
In 2015, a new network named Ethereum was created to offer everyone an unstoppable code platform. Similar to Bitcoin, it aims to bring decentralization to the world, it uses a blockchain, open consensus mechanism and proof-of-work. It allows users to write code (an application) and run the code in a decentralized manner. The unstoppable and uncensorable financial transactions with Bitcoin is already a huge step towards decentralization, but unstoppable code is another level. Anyone in the world can write a piece of code about anything and is able to run it without getting any permission or fear to be stopped. In addition, anyone in the world is able to use the application without any permission. These kinds of applications are called decentralized applications (DApp). It should be noted that the code that is written has to be designed to be decentralized. Even if you use an open blockchain infrastructure to run your code, it does not mean that your application itself is decentralized if you design your code badly. There are tons of applications that run on Ethereum that are extremely centralized. They design the code so that the admin can stop the application, they put whitelist or blacklist functionalities so that they can censor anyone which uses the application. They even design the code that they can edit (update or change) the application anytime. These kinds of applications just re-create another banking system using a very complex programming language that only a few people understand, on an immature, slow and expensive infrastructure.
This is why we have created Resardis Decentralized Exchange (DEX). We believe in decentralization and open finance. We chose to run Resardis DEX on the Matic Network, which is a side chain on top of the Ethereum network. Everything is decentralized in Resardis, you can verify all the code anytime, everything is open-source, no login, no KYC, no censoring. Just trading.
