Difference between revisions of "Decentralized Networks"

Revision as of 03:52, 27 January 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.

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

Tor

Dark Webservers

Security concerns

Ethical concerns

Regulatory efforts

See also

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/