Are we really eliminating central authorities with blockchain?


There is a lot of promise around blockchains. While we at DeepChains do subscribe to the philosophy and would be eager to provide business solutions to meet the industry needs but there has been a lot of double talk, it seems with blockchains.

The premise of blockchain is the following

  • No central registration – No big papa.
  • Decentralized – there is no single point of failure.
  • Safe – Encrypted and secure.
  • Private – My data as an individual is not held by a central authority. I choose what to share
  • Secure – end-to-end encrypted communication routed over Tor.
  • Open – Open source code

However, for all the so-called currency exchanges, this does not seem to be the case. Let us understand the premise of Bitcoins philosophy first. If you look at the image below, we are trying to get rid of any central agencies,

screenshot-from-2016-11-27-13-37-34

We are trying to get rid of any paperwork that needs to be submitted to these central agencies which make me share more information than what i need to.

Screenshot from 2016-11-27 13-38-03.png

and I need to be working without any central control in a true P2P manner.

screenshot-from-2016-11-27-13-41-19

However, let us cut to the current state of things with any blockchain enabled exchange that we are talking about. The current set of exchanges work on the concept of centralisation. They would become the man in the middle instead. So now we take out the banks but we have these men in the middle which would peddle less money than the traditional banks but peddle nevertheless. They would keep your information and subver the ideal blockchain model.

Screenshot from 2016-11-27 14-56-32.png

Let us take the example of a leading Bitcoin exchange called Unocoin in India. It provides a valuable service for converting Bitcoins into currency of choice but it does charge a fee. It asks me to store by Bitcoins in a wallet that it gives me and also asks me to submit a lot of information about me including some of my key identities (which is probably required by the law of the land). Let us see how it defeats the purpose on the parameters that we discussed.

  • No central registration – It is Central
  • Decentralized – Single point of failure. If Unocoin is down, i cannot transact
  • Safe – Encrypted and secure. Probably true.
  • Private – My data is held in central repo. I cannot decide what i need to share and what not to share.
  • Secure – Yes
  • Open – No

So as we see it fails to deliver some of the credible requirements from the original philosophy. Also, since there are so many central exchanges present, it almost ends up being like banks competing with each other on their exchange rates and you have to do the homework to get to the right one. I have seen so many videos and tips on how to buy on one exchange and transfer to another and then sell it on another exchange so that you can get the best leeway.

So essentially, YOU (A) as a person cannot decide how much you would want to transfer to another person (B) exactly the way you would want to. You would have to go through an intermediary (central system) to make the transfer happen. Ideally, we would like to see  NO CENTRAL system and the money should just be transferred form computer to computer on a P2P network. Something like this

Screenshot from 2016-11-27 15-11-36.png

In support of this paradigm, Bitsquare seems to be working on this model with a software which works. This seems to gel well with the idea of actual decentralisation.

In the next few blogs, we would be looking at these differences in detail but for now a lot of new exchanges are spinning up which seem to be creating pseudo central agencies rather than decentralised ones.

Keep tuned.


References and image courtesy:-

[1] https://bitsquare.io/

[2]https://blockchainedu.org

About Vikas Hazrati

Vikas is the Founding Partner @ Knoldus which is a group of software industry veterans who have joined hands to add value to the art of software development. Knoldus does niche Reactive and Big Data product development on Scala, Spark and Functional Java. Knoldus has a strong focus on software craftsmanship which ensures high-quality software development. It partners with the best in the industry like Lightbend (Scala Ecosystem), Databricks (Spark Ecosystem), Confluent (Kafka) and Datastax (Cassandra). To know more, send a mail to hello@knoldus.com or visit www.knoldus.com
This entry was posted in Blockchain, Scala and tagged , , , . Bookmark the permalink.

2 Responses to Are we really eliminating central authorities with blockchain?

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s