Blockchain technology is based on decentralization, meaning that decision-making and management are spread out among multiple bodies instead of centralized in one place. In this article, we'll take a look at the history of decentralization and the current state of blockchain networks.

The Decentralization Movement: Cypherpunk

The term "cypherpunk" was first used in 1980 by writer Bruce Bethke. A cypherpunk is a person who believes that strong cryptography and privacy-enhancing technologies are the way to bring about societal and political change. They are against censorship and monitoring by the government and police. 

In 1993, Eric Hughes wrote the CypherPunk Manifesto, which stated that if a stronger authority gives privacy to a weaker person, it is no longer an inviolable right. It becomes something that can be taken back. This is why the cypherpunk movement strongly advocated using anonymous and decentralized currency systems that were free from state interference.

Solving the “Byzantine Generals' Problem”

Digital currencies, such as B-Money, Bit Gold, and Hashcash, existed before Bitcoin. However, these projects didn't solve an essential issue in a decentralized system and, therefore, never gained enough momentum The issue is how to ensure that the system functions accurately even if numerous network nodes are malicious or perform sub-optimally. This issue is known as the "Byzantine Generals' Problem."

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An army has surrounded the enemy's castle, which is very well-fortified. To take it down, the army needs to coordinate its attack. However, some of the generals are corrupt and plan to retreat instead of attacking, making sure that the castle defeats the army. So, how can the army ensure success despite these malicious elements? This situation is known as the Byzantine Generals' Problem. 

In a decentralized currency network, not solving this problem could lead to "double-spending," which is when a digital cash system has a flaw that allows the same token to be spent more than once. 

Proof-of-Work And The Road To Decentralization

To address this issue in Bitcoin, Satoshi Nakamoto implemented Proof-of-Work, a solution first presented by the British cryptographer Adam Back. The main idea behind this algorithm is that participants must lose something valuable (electricity) if they choose to act against the system's interest. 

Mining is the term used for PoW. It allows anyone with the proper mining equipment or who is part of a pool to be a miner. These miners use their computing resources to solve computational puzzles continuously. 

When a miner successfully solves the puzzle, they get to add their block to the blockchain. Solving these puzzles requires a lot of work and resources, So if a miner is malicious and wants to mine blocks and fork the chain, they will need to waste a lot of resources, which, depending on the hashrate, probably would be too expensive for them. 

Therefore, the P-o-W consensus mechanism ensures that a decentralized system works in a decentralized manner without depending on the goodwill of the participants.

The Flaws Of PoW

In the world of blockchain technology, Proof of Work (PoW) is the most widely used consensus algorithm as it is highly secure and has been tested in the field. However, it comes with an inherent drawback given its purpose of being transactional: it prioritizes security over speed. 

While this is acceptable for small networks, it is not sufficient for a global monetary system. Bitcoin can only process 7-10 transactions per second which is not enough for a global economic system.

During the ICO craze of 2017, scalability became a popular topic. Many projects arose that prioritized speed by centralizing their blockchain. The consensus algorithm used by these projects involves selecting certain delegates or leaders to be responsible for the voting process instead of the entire network participating. 

This approach was much faster than the traditional Proof-of-Work consensus because fewer nodes were involved in the consensus. However, this approach raised significant centralization concerns.

 Speed Or Decentralization?

Some payment networks can process thousands of transactions very quickly, but this often comes at the cost of reducing their level of decentralization. If a network prioritizes speed over decentralization, it may not be considered a fully decentralized payment system. The XRP network, for example, is very fast but is also very centralized.

Only a few protocols, such as Qtum, Ethereum, and Bitcoin, remain fully decentralized. Qtum has a unique ability to adjust its blockchain parameters without needing a hard fork.

At the core level, Qtum can handle about 1,100 TPS, making it far more scalable than Bitcoin.

The implementation of Segregated Witness (SegWit) has boosted Qtum's throughput by 60%. 

In 2021, Qtum executed the Fastlane hard fork, which reduced block spacing from 128 to 32 seconds while also reducing block rewards. 

Qtum’s “Decentralized Governance Protocol” allows the community to adjust the block size up to 8000kb without a hard fork, allowing the chain to scale during times of congestion. There’s also a mechanism that allows the community to raise or lower the gas fees, which means Qtum can never become expensive.

However, if it ever gets too expensive, Qtum has implemented Its version of Bitcoin’s Lightning Network. This second-layer scaling solution can handle millions+ of transactions per second. It also allows for payments per action/click without the need for a middleman. 

In summary, it's not necessary to centralize a blockchain to achieve high throughput. Projects can maintain censorship resistance and community governance in a trustless state while providing the speed necessary to build the future of finance.

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