When does blockchain become fully decentralized? You may be surprised to hear that no blockchain project is currently 100% decentralized. Decentralization can be divided into two basic areas. The decentralization of the production of the blocks, i.e. at the network level, and the management of the project. Cardano, Bitcoin, Ethereum and other blockchains are doing well in terms of decentralizing block production and we can look at the number of pools, delegates, etc. The beginning of each project was centralized and went through a so-called bootstrap period in which the team played an important role. Many blockchain projects may never get out of the bootstrap period. This means that a centralized team, or a few individuals or groups, will have control over the management of the project. The Voltaire era is the last development phase in the Cardano roadmap in which the project will come under community control, including management. Let's explore this topic in more depth. TLDR Satoshi left Bitcoin, but the lead developer role was handed over to Gavin Andersen. That's the same as a CEO replacing a departing one. Cardano is in a bootstrap period. The team is moving towards putting the management of the project in the hands of the community. Both Cardano and Bitcoin have decentralized block production. The team cannot remain in the position of deciding on future changes or the roadmap as it wishes with little to no accountability. For a project to be economically sustainable and independent of external funding, it needs to be able to reward not only network participants but also management and developers. False narratives around decentralization Let's first clarify what exactly we mean by bootstrap period. This is the initial period of a decentralised network in which the team has a relatively large amount of control over the network. The control can relate to both block production and project management. The aim of the team should be to gradually hand over activities and responsibilities to the community. It is usually easy for teams to hand over control of block production to the community. It is much more difficult to hand over control of the project treasury, roadmap, release of new versions of clients, decision-making on important changes, and so on. Very often we see the opinion that Bitcoin must be decentralized because Satoshi left the project. Many people believe that Satoshi closed the bootstrap period and that both block production and project management are decentralized. This is a big mistake and we don't understand why this opinion is so widespread. Satoshi Nakamoto was the lead developer of Bitcoin. When he decided to leave the project, he had to hand the project over to someone. Specifically, control of the source code and the right to sign off on a new version of the client. The source code of blockchain networks is publicly available. Anyone in the world can create their own version of the Bitcoin client (fork the original branch) and change anything in the code. People running full nodes usually only trust the version that comes from the core team. It is not possible to get rid of the need to manage and make decisions about the project by leaving the project. Someone has to take over this role. Something like a project without governance cannot exist. Satoshi Nakamoto did not end the bootstrap period but handed over the leadership to Gavin Andersen. It's similar to a CEO leaving the company and being replaced by someone else. The only difference is that no one probably knew who Satoshi was. Wladimir van der Laan took over the position of Bitcoin main developer from Gavin Andresen in April 2014. Wladimir stepped back from the Bitcoin Core role in early 2021. The GPG key used to sign Bitcoin Core releases carried his personal name. Wladimir said: One thing is clear: this is a serious project now, and we need to start taking decentralization seriously. Did Wladimir mean to say that Bitcoin decentralization was not taken seriously by the time he left? Under the leadership of Gavin and later Wladimir, Bitcoin has had a team including a leader all along, and that remains true today. When Satoshi left Bitcoin, nothing fundamentally changed from a management perspective. The belief that Bitcoin is decentralized because it has no governance or management is strong. The reality is that this is a false narrative propagated by Bitcoin influencers. People mistakenly believe that Cardano is centralized because Charles Hoskinson is the CEO of the IOG team and he is involved in the development of Cardano. Cardano is still in the bootstrap period and will be until the Voltaire era closes. Most project fans know this. It is important to say that Bitcoin, Ethereum and all other projects are also still in the bootstrap period. In other words, the projects are very similar in terms of management. If someone claims that Charles centralizes Cardano, it would be fair to say that Wladimir centralized Bitcoin in a very similar way. The IOG team is large and from the outside, it may appear to be very similar to the company. The IOG team is not backed by VC funds whereas many companies who build bitcoin are. For example, Blockstream, which is headed by Adam Back, is VC-backed. See for yourself how many recent BIPS have the names of Blockstream employees Pieter Wuille and Andrew Chow under them. Companies building Bitcoin may have conflict of interest issues. Blockstream is building the Lightning Network and therefore may not be interested in solving the scalability of the first layer of Bitcoin. We would not like to speculate whether or not this is the case. Maintaining the narrative of "conservative Bitcoin development" is very convenient for Blockstream when you consider that they are building alternative networks for BTC transfer with the support of VC funds. Although critical voices are occasionally heard in the community, they are not strong enough to bring about a more fundamental change in terms of greater transparency in project management. The development of Cardano is done in a very transparent way. The roadmap is clearly defined from the start, including a plan for handing over control to the community. Cardano is in a bootstrap period, but it is moving towards putting the management of the project in the hands of the community as well. The production of blocks In terms of block production, Cardano is a fully decentralised network. Blocks are regularly produced by more than a thousand pools, and the number of ADA delegators continues to slowly increase. Neither Charles nor the IOG team can shut down or stop the network. Staking pool operators voluntarily decide which version of the client to install on their nodes. No one can force them to shut down the node. It should be added that staking pool operators are very active and carefully research and test the newly proposed version of the client. The IOG team has no chance to change the monetary policy of the protocol, for example. The community would not agree to such a change, and probably few people would install a client with such a modification. In terms of block production, Cardano and Bitcoin are decentralized networks. Cardano has hundreds of independent pools, Bitcoin has 3 dominant pools and several small ones. Over 1.2M people stake ADA and there are several whales. There are a large number of PoW miners and several large players who have tens of thousands of ASIC devices in large mining halls. We can compare the decentralization of blockchains and have some opinions on which one is more resistant to various attacks. However, we must not mix the production of blocks with project management. That's a separate chapter, and as we have shown above, no project is decentralized at this level. Decentralization of block production consists of people who do not know each other and make decisions autonomously. They run their own node and produce blocks. The power of pools is supported by delegators (ADA stakers or PoW miners), making the distribution of power more spread out among multiple entities. What's important to note is that block production is not directly dependent on the team. All economic incentives, including the mechanism for paying rewards, are built into the protocol. People are not paid for their work for the network by the team, but directly by the running network. The network is truly decentralised if it is open. This means that anyone can create a pool, just like anyone can become a delegator of the consensus power. Back to the decentralisation of management In theory, if the protocol never had to be changed again, the network would run forever completely independent of the team. Everyone, pool operators and users, would be using the same version of the client. The client would never change. In this case, the network would be 100% decentralized because the team would never be needed again. However, we will never reach this state because blockchain protocols, like any other software, need maintenance and innovation. What is important from a decentralization perspective is the communication between the team and the users. The team cannot remain in the position of deciding on future changes or the roadmap as it wishes with little to no accountability. In such a case, this would be a blatant form of centralisation and unilateral control over the decision-making process on the future of the protocol. It is naive to think that it is possible to create software that will be around forever. So far, no one has succeeded. Blockchain protocols are likely to face problems that will either be resolved or the project may run into critical trouble. Imagine if a blockchain project was financially and socially significant in the same way as central banks or governments. It may sound overly ambitious, but that is essentially one of the goals of decentralisation. What position would the team have in such a case? You can probably imagine that it would be very significant and that it could be influenced by various interest groups. There could be non-transparent agreements. It would move us back towards the centralisation of power. If we are to avoid this, we must seek decentralisation at the level of project management. Cardano may be one of the first projects to be well decentralised not only at the network level but also at the management level. The big advantage is that VC funds have no control over Cardano yet and let’s hope we can avoid it. Cardano has a project treasury and the community will one day have a say in the distribution of the ADA through a vote. Few people today realize how important this is. For a project to be economically sustainable and independent of external funding, it needs to be able to rewards not only the people who keep the network running (pool operators, stakers, miners), but also the people who write code, participate in research, and suggest changes. External funding is a risk because the people or organisations giving the money may have certain requirements that may not be in line with what the network users want. The ability to self-finance is extremely important for the independence of the project. The team, or multiple teams, must serve the community and ideally should be independently funded. A project does not need to have a project treasury like Cardano and can make do with donations. However, the community should have decision-making power over what gets funded and what team gets the right to make the change. No team should have a lifetime right to participate in the modification of the protocol without the possibility of cancelling the contract. Conclusion Most people on the planet know next to nothing about software development. That's why they believe in false narratives. They think that Satoshi launched Bitcoin and it will run forever. They believe that the only thing Bitcoin depends on is miners or the profitability of mining. It's really not that simple. The Bitcoin client is being modified every day and someone is paying for this development. One day we'll say that Charles Hoskinson and his team launched Cardano. The project will be run by the community. What will be the fate of the IOG team? I assume it will continue to be involved in the development of the protocol. What exactly the team will work on and how much they will get from the project treasury will be decided by the community. Decentralized governance is the path Charles and his team are paving for Cardano in the bootstrap period. It's up to the community how it takes on the role of Cardano protocol owner.
