Zhao Changpeng writes again: Decentralization is a means to achieve the goal, not the goal itself

Author: Zhao Changpeng, Founder of Binance

Original Title: "CZ on Centralization Vs. Decentralization (2022)"

Translated by: Hu Tao, Chain Catcher

This is an old, recurring topic, as old as cryptocurrency itself. Inevitably, I am asked this question every time I participate in an AMA session.

This is also a topic I often think about, and I have shared my views on it more than once in this blog post from 2019.

Three years have passed, and my views have hardly changed, but the additional time has allowed me to add new depth and dimensions to my thoughts on this important topic.

Essentially, I believe the first thing to understand is that decentralization is not binary, nor is it one-dimensional. Decentralization has multiple aspects. Each aspect is a gradient scale rather than a simple black and white.

It is also important to remember that decentralization is a means to achieve a goal, not the goal itself. The goals are freedom, security, and ease of use.

Many people may disagree with the above statement. I will explain why.

What is Decentralization?

You might hear people say, "Not your keys, not your crypto." These people tend to define decentralization as having your own private keys. In this regard, TrustWallet (a Binance portfolio company) is decentralized. Binance.com is centralized. This is a good perspective.

You might hear people say, "There are too few nodes or validators, so you are centralized." While a lower number does mean the blockchain is more centralized, there is no absolute number that everyone agrees upon as a benchmark. It is a gradient scale.

You might hear someone say, "Bitcoin mining is too centralized because the top 2 or 3 mining pools control over 51% of the hash power." This is also true and is often used as a counterargument by proponents of POS blockchains.

You might hear people say, "Ethereum is centralized because Vitalik can greatly influence its direction." This makes sense. Blockchains with clearly associated founders have this drawback. Bitcoin is more decentralized in this regard.

In defense of Ethereum, it has also been forked several times.

BNB Chain is often associated with me (CZ), but my involvement in the technical development of BNB Chain and its evolving ecosystem is much less. Similarly, it is not absolute but a gradient scale.

You might hear people say, "Bitcoin is centralized because some addresses hold a large amount of coins." Again, this is somewhat true. Dogecoin is worse in this regard. One top address holds 30% of the total supply, and the top 20 addresses hold over 50%. Like validators, there is no absolute number that everyone agrees upon as a benchmark. It is a gradient scale.

I could go on. But I hope you see that decentralization has many different aspects. It is often contextual and nuanced, and I hope you begin to look past the binary nature of the initial arguments.

Why Decentralization?

Because we do not want a few centralized entities to have unlimited power over us, charge us excessive fees, control how we use our after-tax funds, etc. We want to empower people with power, control, and freedom.

People want to transact freely, securely, easily, and at low cost.

Decentralization is a means to achieve the above goals, which requires time, collaboration, and trust among different groups.

Moreover, we belong to such a young industry that we are building the future every day.

Taking a big step forward may not always yield the best results. What we do must be in sync with other parts of the ecosystem.

For example, with the tools available today, most people cannot secure their wallets. The details of this are beyond the scope of this article, but it goes without saying that to form a decentralized future, we must address multiple barriers. See "Keeping Your Crypto Safe (CZ's Tips)."

Between decentralization and the potential loss of your tokens, or using centralized services to hold your tokens, most people today still choose to use centralized exchanges. This is why CEX is more popular today. Centralized exchanges provide a stepping stone for users to access cryptocurrency and can serve as a bridge between centralized systems and decentralized systems.

Conclusion

Having said all this, I/we are strong advocates for decentralization. At Binance, we believe in taking incremental steps and providing users with all available tools. Binance invests heavily in the development of CEX and DeFi solutions, and we will continue to advocate for a future where freedom and security go hand in hand.