Understanding the impact of Decentralization.

    Blockchain, cryptocurrency and bitcoin, in particular, has made a lot of headlines in the past years. So many people do not understand why this is so. It seems as if its something that was built in a single day and started making headlines for the rest of the year. Its also quite difficult for a non-tech individual to understand why so many people are talking about Bitcoin/Blockchain/Decentralized Systems. I hope I will do enough justice here for someone with little knowledge to understand the jargon.

    The aim of this article is not to make you understand the blockchain but for you to understand what is really beyond it and why it has been able to shake the financial world. Now let’s go back to a number of years ago before the existence of Bitcoin.

    The story about Napster

    In the year 1999, at North Eastern University, a freshman at the college began developing a new program called Napster. If you are old enough you might have heard about Shawn Fanning. Shawn went on to drop out of school so as to concentrate on his new software. Napster was going to be a software that can be used by individuals to share their music peer to peer. In that era Compact Disc(CD’s as you might have known them), were very popular and made those in the music industry a lot of money. Back then, music was sold in somehow a very ridiculous way that made the creators and distributors very rich. You would buy a whole CD just so you can listen to that new hit from Puff Daddy(Now know as Diddy). However, Napster came and disrupted everything and the service gained so much attention that the music industry started to feel the heat. If someone had new music from Jay Z, they would make it available on Napster and you could just download it.

    Four months after its June 1999 launch, 150,000 people had signed up. By February 2001, it peaked at a verified 26.4m users, with some estimates topping 80 million. – The Guardian

    However, over the coming years, Napster would get hammered down by Record labels and was forced to shut down its operations. Although there are so many sides to look at this story, we will concentrate on what we need to understand.

    Why Napster grew so big in a short period of time?

    The growth of Napster is not to be underestimated. It is something notable. If we are to look into the real reasons it grew so fast, we can narrow it down to 2 things. The first issue was people were tired of being ripped off their hard-earned money and secondly, Napster brought a lot of convenience with its new software. You no longer needed to go to the stores to buy the CDs. This is the reason why a lot of people started using Napster.

    The shutdown of Napster.

    Napster closed it’s doors after the music industry won a legal battle. The only reason why Napster was shut down is that it used a central server. The company had a single point of failure. These are the consequences of being centralized. As much as everyone loved using the service, everything was brought to an end.

    The rise of Torrents.

    After the shutdown of Napster, it was the company that was shut down and not the idea. All that was needed was to focus on improving the weaknesses that had got Napster into a downfall. So an idea came up that would change the whole game – decentralization. Torrents would create another Napster that however could not be taken down by any organisation. The question then is what did the creators of the torrent network do differently?

    Now imagine starting a network of people who would be proud to keep it running without getting any incentives but just because they are really into what they believe is right. To make it easy for you to understand, if you want to download any movie or music on torrents, what you are simply doing is accessing someone else’s computer for that movie. So somewhere out there, is a number of individuals who have the movie that you are looking for. When you make a request to download it, then you will be getting chunks of the movie from different computers until it becomes one file. That’s why you will always see the word seeder and leeches on any torrent file. Usually, you will always see a lot of torrent websites encouraging you to seed your files. Although torrents come with their own issues, they managed to address the problem of using central servers and they distributed the power of the network to the users.

    Decentralization on Blockchain

    With all concepts in play, the brainchild of Bitcoin, Satoshi Nakamoto implemented the same idea that is used by torrents. One of the big differences, however, is that Bitcoin’s blockchain introduced incentives for anyone who supported the network truthfully. Simply put, you get paid if you help decentralize the Bitcoin network through two processes namely Bitcoin mining and maintaining a full node. We will not get into detail about mining but there is an interesting method that was utilized by Satoshi to make it easy for everyone supporting the Bitcoin network to remain obedient. The Game Theory forces everyone in the network to act accordingly to what the network expects them to do. However, I will write more on game theory in an article about Blockchain principles.

    Decentralization is the way to go!

    To conclude this article, if you are ever thinking of disrupting any industry then decentralization is the way to go. Why? Bitcoin has proven this. Bitcoin was not the first currency that was developed by an individual who was trying to move people from the central banking system. A lot of people tried to create all these currencies but failed because they had a single point of failure. They could easily get shut down by the government or authorities. Bitcoin has proven to its competitors that it is just more than a currency and they cannot just make a decision to shut it down.

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