Difference between revisions of "Decentralized Networks"

Revision as of 22:00, 3 February 2022

Decentralized networks are systems which inherently have no central authority or governance. These systems often operate on individual computers spread across the globe, interconnected by the Internet, also known as peer-to-peer networking. These computers act in unison towards a common goal. ^[1]

Computers within decentralized networks are capable of operating independently of each other. As a result, the variety of services and applications built on decentralized networks are often difficult for third parties, such as governments, to shut down.

History

Notable applications

Decentralized finance (DeFi)

Decentralized finance applications use blockchain technology to provide access to financial instruments without the need of going through conventional financial intermediaries such as banks, brokerages, or exchanges. People may trade digital assets on these platforms much like in physical markets. However, DeFi allows for pseudo-anonymous cryptocurrency trading, market speculation based on derivates, borrowing and lending of cryptocurrencies.

Decentralized finance operates on smart contracts, which are essentially software made to run on decentralized networks such as the Ethereum blockchain. Since the blockchain is publicly accessible, anyone may audit the smart contracts used in DeFi to ensure it is not malicious. This presents a stark contrast from traditional financial institutions, which typically do not release the source code of banking software, but also presents risk in that security vulnerabilities present in smart contracts may be exploited for individual gain.

Cryptocurrency

Cryptocurrencies are digital assets designed to be virtual stores of value which are independent of centralized governance. Transactions involving cryptocurrencies are typically stored on a digital ledger, with the transactions being processed based on a consensus model within the cryptocurrency's decentralized network, with proof-of-work being the dominant protocol.

The first cryptocurrency, Bitcoin, was released in 2009, and as of January 2022 has a market capitalization of US$xxx billion. Numerous other cryptocurrencies, known as altcoins, have emerged since Bitcoin, seeking to provide additional or improved functionality over Bitcoin. Examples include Ethereum which has the capability of running smart contracts, Ripple which provides real-time settlements, and ZCash which provides true anonymity for transactions.

Cryptocurrencies operate on a consensus model to decide parameters of the system, such as how often new currency is created and how much is created. The decentralized network of users, each have a proportional share in deciding the consensus by proxy of their computing resources, or ownership of the currency. Cryptocurrencies are defined by the parameters of the network which has majority consensus, so any diverging networks would typically cease to be recognized by the community and thus lose value. Occasionally, such as in the case of the Ethereum and Ethereum Classic networks, the consensus diverges but both are still recognized as valid networks and retain some value, such an event is known as a chain split.

File sharing networks

Decentralized networks can be used to run file sharing services which are immensely redundant and thus provide high availability. The essential concept behind these networks is that many computers each store a copy of a file, and transmit it (or a part thereof) to other computers which request the same file.

BitTorrent

BitTorrent is a peer-to-peer file sharing protocol which allows for electronic data distribution over a decentralized network. The protocol is designed such that it reduces the computing resources needed to distribute large files. Files are segmented, then distributed to different computers which then simultaneously upload segments others need and download segments it needs from other computers. Doing so reduces the impact on global internet traffic, as users may download files from a more local source rather than a server located in distant geographic regions.

In 2019, the BitTorrent protocol accounted for 2.46% of downstream, and 27.58% of upstream internet traffic. ^[2]

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InterPlanetary File System (IPFS)

IPFS is a peer-to-peer decentralized network used to preserve and share data in a distributed file system. The data stored on it is duplicated across several computers on the network, so if one computer goes offline, the data is still accessible. It is designed as an easy to use, global store of information, with a defined naming scheme, IPNS, to uniquely locate items by.^[3] It has been used for archival efforts such as for the Genesis Library, which archives books and journals.^[4] Similar to BitTorrent, users have the option of preserving media it accesses and redistributing it to others.

Onion Routing

Onion routing is a communication protocol used to communicate anonymously and securely on computer networks, utilizing a decentralized onion network. Instead of communicating directly between two computers, onion routing encapsulates the data in several layers of encryption, and passes it on through a series of computers on the onion network. As the data transits through each computer on the way to its destination, a layer of the encryption is 'peeled' away, revealing the next destination of the data. This ensures the intermediary computers do not simultaneously know the initial source and the final destination of the data it is transmitting, protecting the anonymity of the sender from the intermediaries. ^[5]

Tor and the Dark Web

Tor, which is an abbreviation of The Onion Router, is a free, open-source implementation of onion routing. For ease of use, Tor has been implemented into a web browser based on Chromium, the Tor Browser. It allows users to visit internet websites anonymously, and prevents eavesdropping by third parties. Content which is region locked, or blocked by local governments can also be accessed through the use of Tor.

The use of a Tor-enabled network also allows users to access the Dark Web, a collection of websites not normally accessible via the Internet. These websites are hosted on servers whose physical locations are effectively hidden due to onion routing.

Security concerns

The open source nature of decentralized networks allows malicious actors to find and exploit vulnerabilities present on the network. In 2016, a vulnerability in the DAO's smart contract on the Ethereum network allowed attackers to drain 3.6 million Ether out of the DAO's accounts. This caused the price of ether to drop from $20 to $13 and triggered proposals of a soft-fork or hard-fork to reverse the attack. ^[6]

Cryptocurrency "mining", the process of exchanging computing resources for a cryptocurrency can be done anonymously. In 2013, ESEA, a private CS:GO server, which requires its users to install an anti-cheat application on their computers to access game servers, was exposed for embedding a bitcoin miner within the anti-cheat application. The miner was embedded by a single rogue employee and could have affected the over 500,000 users of ESEA. ^[7]

Cryptocurrency exchanges, where users can trade cryptocurrencies for other assets have also become a popular target of hacks. In 2014, 744,408 bitcoins, worth US$350 million then, were stolen from what was then the largest bitcoin exchange, Mt. Gox. This later led to Mt. Gox declaring bankruptcy. ^[8] In 2016, 119,756 bitcoins, worth US$72 million then and US$5 billion today, were stolen from the cryptocurrency exchange Bitfinex, which opted to split the loss between all users on its platform. ^[9]

Ethical concerns

Traceability

The anonymity provided by decentralized financial platforms prevents value transactions from being tracked. KYC/AML laws, which would typically apply to conventional financial institutions, do not apply to these platforms. In addition, even though many cryptocurrency transactions are publicly viewable, there exists cryptocurrency shuffling protocols which allow users to hide their transactions by pooling multiple users' holdings into a shared account then splitting it in small amounts.^[10] Such protocols significantly hinder third parties' abilities to trace the exchange of cryptocurrency between people, making it difficult to tie a particular transaction with the identities of the people involved. Thus, decentralized finance has become an ideal utility for illicit activities.^[10]

In 2017, it was estimated that bitcoin was involved in around $76 billion worth of illegal transactions, and that a quarter of bitcoin users were partaking in illegal activities.^[11] Bitcoin enabled anonymous payments for dark web marketplaces, and became crucial to their operators' evasion of law enforcement. In the case of Silk Road, a marketplace which sold and shipped marijuana, LSD, and other drugs to US based customers.^[12] Its operator, Ross Ulbricht, evaded authorities for two years before being arrested, resulting in Silk Road shutting down.^[13]

Dark web marketplaces also pose a risk in that they lack accountability. The funds buyers use to pay for products is often held in escrow by the platform, which is then released to the seller upon successful a successful transaction. Disputes are resolved by marketplace administrators, and the losing side would have zero recourse as all parties remain anonymous. This leaves room for marketplace operators to perform "exit scams", whereby trading operations are ceased but escrow is not returned to their rightful owners. ^[11]

Energy consumption

Decentralized networks typically have several hundred, if not thousands, of computers online simultaneously. This presents an inefficiency in power consumption. In particular, cryptocurrency blockchains are secured by 'proof-of-work' algorithms which require intense, repetitive computation. This is necessary in order prevent the double spending of funds, and the tampering of past transactions. In 2017, it was estimated that the energy consumption of the Bitcoin network alone is in the range of 100-500MW. ^[14] In November 2018, a new estimate put the power consumption of the bitcoin network at 5.22GW, marking a significant increase over previous years. Annual carbon emissions from bitcoin mining has been calculated to be between 22.0 and 22.9 MtCO2, an amount which is between that produced by Jordan and Sri Lanka and is comparable to the level of Kansas City. ^[15] Source of the this power have been speculated to include among other things, Chinese coal, Icelandic geothermal power, and Venezuelan subsidies.^[16]. In 2022, the Cambridge Centre for Alternative Finance estimated bitcoin's energy usage to be 14.66GW. ^[17] At this power consumption, and the roughly 300,000 daily transactions on the network, each transaction requires approximately 1173KWh to process.

There have been proposals to extend the proof-of-work algorithm using proof-of-stake, which instead uses the bitcoin balances of users to secure the network rather than computation, thus cutting down on energy consumption. ^[18] However, as of 2022, no such proposal has materialized as an official update to the bitcoin network.

Hardware shortages

As cryptocurrency prices increased in 2020 and 2021, Ethereum mining in particular has been blamed for causing consumer graphics processing unit (GPU) shortages. Popular consumer GPUs have continued to sell out as fast as they're produced. ^[19] This has to price increases of GPUs due to lack of supply. GPU scalpers, who buy many GPUs to sell at higher than the manufacture suggested retail price (MSRP), were estimated to have raked in US$61.5 million in sales in January 2021 ^[20]. As of January 2022, GPU prices on eBay are up roughly 100% compared to MSRP ^[21]. Everyday consumers have been forced to resort to using the service of bots in order to purchase GPUs at closer-to-retail prices, with bots competed against each other in purchasing GPUs on vendor websites. ^[22] In 2021, to alleviate the excess demand caused by Ethereum miners, GPU maker Nvidia stepped in and created a new line of GPUs which limited the performance of their GPUs in Ethereum mining, dubbed "LHR" GPUs. ^[23] However, the effectiveness of Nvidia's LHR GPUs has largely been considered a failure as it has been riddled with workarounds. ^[24][25]

Piracy

Decentralized networks in the form of torrenting and IPFS have the potential to be used to share copyrighted works, leading to what is known as online piracy. Pirated content is not paid for, and the owners do not receive a direct for its usage. As such, digital piracy has posed a significant threat to the development of the software industry and the growth of the digital media industry. ^[26]

In 1999, an audio streaming service, Napster, was launched. It resulted in an uptick of online piracy of music, as it allowed users to share content via peer-to-peer file sharing, much like modern day torrenting ^[27] Almost immediately, the Recording Industry Association of America filed a lawsuit against Napster^[28], alleging that it was liable for contributory or vicarious copyright violations since it was allowing millions of users to obtain copyrighted music for free. By July 2000 however, a federal judge ordered that it be shut down, which Napster complied with in July 2001. ^[29]

In 2003, The Pirate Bay was launched, and began serving as an online library of digital content of entertainment media and software. Although efforts have been made by governments to block access to The Pirate Bay, proxies which bypass these censorship attempts emerged. ^[30]

Google's executive chairman in 2011, Eric Schmidt, has regarded governments' efforts to prevent access to illicit filesharing websites could set a "disastrous precedent" for freedom of speech. Schmidt likened such efforts as being equivalent to that of China's great firewall, which monitors and filters internet traffic crossing China's international borders.^[31]

A similar filesharing service, but focusing on providing access to academic journals and books, Sci-Hub, was launched in 2011 in response to high cost of research papers behind paywalls.^[32] As of February 2022, Sci-Hub provides access to more than 88,485,426 papers.^[33] A spokesperson for a journal publisher has noted that “Sci-Hub does not add any value to the scholarly community. It neither fosters scientific advancement nor does it value researchers’ achievements. It is simply a place for someone to go to download stolen content and then leave.”^[34] Journal publisher Elsevier has claimed that it was losing hundreds to thousands of dollars for each of its articles which are pirated on Sci-Hub, and have filed a lawsuit to shut Sci-Hub down.^[35] Elsevier also named Library Genesis as a defendant in the same lawsuit.^[34] Though the lawsuit was resolved in Elsevier's favor, awarding them $15 million from Sci-Hub, the fine has not been paid as of December 2021.^[36]

Permanence

Torrenting and IPFS allows for a single file to exist across multiple computers. This makes the deletion of files from the internet difficult, if not impossible. In 2014, a collection of private pictures of celebrities was obtained and leaked to the internet, in an event known as Celebgate.^[37] The photos were initially spread through link-sharing websites such as Reddit, but soon administrators of the site shut down the activity due to concerns of child pornography being present within the collection. ^[38] However, this collection was also disseminated through the use of torrents,^[39] which have no governing authority which can prevent the spread of its contents.

Regulatory efforts

References

1. ↑ Kremenova, Iveta, and Milan Gajdos. "Decentralized networks: The future internet." Mobile Networks and Applications 24.6 (2019): 2016-2023.
2. ↑ Marozzo, Fabrizio, Domenico Talia, and Paolo Trunfio. "A sleep‐and‐wake technique for reducing energy consumption in BitTorrent networks." Concurrency and Computation: Practice and Experience 32.14 (2020): e5723.
3. ↑ https://ipfs.io/
4. ↑ https://web.archive.org/web/20201127164841/http://freeread.org/ipfs/
5. ↑ Syverson, Paul, D. Goldschlag, and M. Reed. "Onion routing for anonymous and private internet connections." Communications of the ACM 42.2 (1999): 5.
6. ↑ https://www.coindesk.com/learn/2016/06/25/understanding-the-dao-attack/
7. ↑ https://www.theverge.com/2013/5/2/4292672/esea-gaming-network-bitcoin-botnet
8. ↑ https://www.wired.com/2014/02/bitcoins-mt-gox-implodes-2/
9. ↑ https://www.nytimes.com/2016/08/04/business/dealbook/bitcoin-bitfinex-hacked.html
10. ↑ ^{10.0 10.1} Ruffing, Tim, Pedro Moreno-Sanchez, and Aniket Kate. "Coinshuffle: Practical decentralized coin mixing for bitcoin." European Symposium on Research in Computer Security. Springer, Cham, 2014.
11. ↑ ^{11.0 11.1} Foley, Sean, Jonathan R. Karlsen, and Tālis J. Putniņš. "Sex, drugs, and bitcoin: How much illegal activity is financed through cryptocurrencies?." The Review of Financial Studies 32.5 (2019): 1798-1853.
12. ↑ http://www.ibtimes.com/marijuana-lsd-now-illegal-drugs-delivered-your-doorstep-290021
13. ↑ https://arstechnica.com/tech-policy/2013/10/how-the-feds-took-down-the-dread-pirate-roberts/
14. ↑ Vranken, Harald. "Sustainability of bitcoin and blockchains." Current opinion in environmental sustainability 28 (2017): 1-9.
15. ↑ Stoll, Christian, Lena Klaaßen, and Ulrich Gallersdörfer. "The carbon footprint of bitcoin." Joule 3.7 (2019): 1647-1661.
16. ↑ The Economist www.economist.com/the-economist-explains/2018/04/03/why-are-venezuelans-mining-so-much-bitcoin (2018)
17. ↑ https://ccaf.io/cbeci/index
18. ↑ Bentov, Iddo, et al. "Proof of activity: Extending bitcoin's proof of work via proof of stake [extended abstract] y." ACM SIGMETRICS Performance Evaluation Review 42.3 (2014): 34-37.
19. ↑ https://www.tomshardware.com/news/gpu-shortages-worsen-cryptocurrency-coin-miners-ethereum
20. ↑ https://www.pcmag.com/news/scalpers-have-sold-50000-nvidia-rtx-3000-gpus-through-ebay-stockx
21. ↑ https://www.tomshardware.com/news/gpu-pricing-index
22. ↑ https://www.theverge.com/2021/12/3/22698588/falcodrin-gpu-hunters-nvidia-amd-graphics-card-tricks-bots-scalpers-miners-gamers
23. ↑ https://blogs.nvidia.com/blog/2021/05/18/lhr/
24. ↑ https://www.pcmag.com/news/cryptocurrency-miners-nvidias-lite-hash-rate-limiter-did-little-to-stop
25. ↑ https://www.digitaltrends.com/computing/crypto-miners-bypass-nvidia-rtx-lhr-again/
26. ↑ Yoon, Cheolho. "Theory of planned behavior and ethics theory in digital piracy: An integrated model." Journal of business ethics 100.3 (2011): 405-417.
27. ↑ Giesler, Markus. "Consumer gift systems." Journal of consumer research 33.2 (2006): 283-290.
28. ↑ https://www.wired.com/2009/12/1207riaa-sues-napster/
29. ↑ https://abcnews.go.com/Technology/story?id=119627&page=1
30. ↑ https://torrentfreak.com/pirate-bay-censorship-backfires-as-new-proxies-bloom-121222/
31. ↑ https://www.theguardian.com/technology/2011/may/18/google-eric-schmidt-piracy
32. ↑ Himmelstein, D. S., et al. "Sci-Hub provides access to nearly all scholarly literature. eLife, 7." (2018).
33. ↑ https://sci-hub.se/
34. ↑ ^{34.0 34.1} Schiermeier, Quirin. "US court grants Elsevier millions in damages from Sci-Hub." Nature News (2017).
35. ↑ https://americanlibrariesmagazine.org/2016/05/31/why-sci-hub-matters/
36. ↑ Else, Holly. "What Sci-Hub’s latest court battle means for research." Nature 600.7889 (2021): 370-371.
37. ↑ https://www.washingtonpost.com/news/morning-mix/wp/2014/09/02/the-shadowy-world-of-4chan-the-shock-post-site-that-hosted-the-private-jennifer-lawrence-photos/
38. ↑ https://www.reddit.com/r/announcements/comments/2fpdax/time_to_talk/
39. ↑ Lawson, Caitlin. "Cascading exploitations: The celebrity nude photo hack as digital phenomenon." AoIR Selected Papers of Internet Research (2015).