This topic is all about decentralization and how decentralization is supported by different blockchain implementations. During the first part of this topic, we will take a general look at decentralization before we will take a closer look at trends in blockchain technology in the second part. Decentralization can be realized to different extents. Many traditional use cases involve one single mandatory intermediary, thus not supporting decentralization. As an example, the court system is the single mandatory intermediary to solve conflicts between parties which cannot come to a result on their own. One step towards decentralization is competition. In this case, there are several possible intermediaries from which entities can choose based on who they trust the most. The complete opposite of centralization is disintermediation. In this case, no centralized authority is present, instead, the blockchain provides rules ensuring safety for the entities. For example, smart contracts can ensure the concurrent exchange of funds and property rights during the sale of an object, leaving both seller and buyer without the risk of default. We are now going to look at our three use cases and how they implement decentralization mechanisms. The first example is Blockchain for Education. In this use case, the issuing and validation of certificates is decentralized, thus any certifier registered on the blockchain can issue certificates and store references to those certificates on the blockchain. Several certifiers belong to one certification authority, which gets approved and added to the network by one out of several accreditation authorities. This represents decentralization based on competition. To provide security for all entities involved in the process, smart contracts are in place to provide rules for identity management and certification management. Slock.it represents the use case providing smart locks for renting objects without the need for a physical key. In this case, the allocation of temporary possession and usage rights is being decentralized. This use case represents a case of disintermediation, as any owner of an object and any interested party can pair up and invoke a smart contract. This smart contract ensures that upon payment of the interested party, he automatically receives the virtual key to the object, and as soon as the rental period is over, the virtual key gets removed from the person’s possession, thus providing safety for both owner and the person renting the object. The third use case describes a food chain, which enables the tracking of food items though the supply chain. As soon as an item leaves or arrives at a station of its supply chain, all necessary data, like time and location, are stored on the blockchain in a decentralized way. Since no centralized authority is used to regulate this documentation, this is also an example for disintermediation. Smart contracts automate payments between supply chain partners and charge penalty fees for delays or inappropriate handling of the food items, thus providing safety for all supply chain partners. Decentralized Autonomous Organizations, also called DAOs, are organizations acting in a decentralized way, independent of any centralized legal entity and without employment contracts. For those organizations, tokens can be sold, providing the token owner with voting and ownership rights. Any token holder can make proposals for projects the DAO should undertake and spend funds on. All token holders can then use their voting rights to support or not support specific projects. For those projects that receive majority support, contractors get appointed to implement those projects. In summary, decentralization can be realized through competition or disintermediation. Smart contracts provide safety in decentralized environments and Decentralized Autonomous Organizations are based on a token system and provide an alternative to centralized organizations.
