Centralization vs Decentralization

Usually, in complex system, decentralization is not all-or-nothing (e.g. the email protocol is decentralized but there are private email providers).

Aspects of decentralization in cryptocurrencies

  • Who maintains the ledger?
  • Who has authority over transactions validity?
  • Who creates new coins?
  • Who determines how the rules of the system change?
  • How does the currency acquire exchange value?

Note that the cryptocurrencies protocols usually are decentralized but services built around them may be centralized (e.g. exchanges).

Aspects of decentralization in Bitcoin

  1. Bitcoin is based on a p2p network: anybody is allowed to join the network. Also, the barrier to entry is really low.
  2. Mining: anyone is allowed to mine Bitcoins, but in this case the power concentrates in few entities in the network.
  3. Software updates: Bitcoin core developers are trusted by the whole community and thus they have a centralized power over the network.