Meditations on decentralisation
Posted by AdEx Network on March 13th, 2020Insights
AdEx Network was born in the crowd. Back in 2017 we were a bunch of kids with an advertising problem in sight and a possible solution in mind. Three versions of a protocol for decentralised advertising, an open platform and 300 million monthly impressions later, we are accepting advertisers and publishers from around the world. The truth is, we wouldn’t be able to get here without the support of the 2,000+ people who took part in the crowdfunding campaign in 2017.
This is one reason for which we will always be a community-driven company and seek to satisfy the needs of our users, supporters and ADX holders. The demand for the ADX token is actually one of the tools available for our community to help steer the course of the company .
A few days ago we introduced a set of new policies for publisher verification on our platform. We did this in order to sustain the quality of the network and to reduce possibilities of ad fraud. At that point, a member of our community raised a very peculiar question:
I like that AdEx is open source but is there anyway that it can become community owned? The new policies show that the platform is very centralised.
This is a motif that we see repeated again and again in the blockchain world. Users demand governance/participation so often that it has become a community mantra. We, however, feel that it’s been overused — and applied to situations where it simply makes no sense.
We figured this would be as good time as any for a quick meditation on the idea of decentralization and how we see it.
Decentralization is particularly good for three cases, very well explained by Vitalik Buterin in his post from 2017:
Fault tolerance — decentralized systems are less likely to fail accidentally because they rely on many separate components that are not likely.
Attack resistance — decentralized systems are more expensive to attack and destroy or manipulate because they lack sensitive central points that can be attacked at much lower cost than the economic size of the surrounding system.
Collusion resistance — it is much harder for participants in decentralized systems to collude to act in ways that benefit them at the expense of other participants, whereas the leaderships of corporations and governments collude in ways that benefit themselves but harm less well-coordinated citizens, customers, employees and the general public all the time.
When you think about it, one of the reasons to create Bitcoin was to avoid collusion of centralized monetary institutions:
“The root problem with conventional currency is all the trust that’s required to make it work.” — Satoshi Nakamoto, 2009
The strive for decentralization is what made cryptocurrencies so popular, so naturally people started to dream about introducing decentralization in organizations and collaborations between people thanks to blockchain and crypto, with DAOs being a hit last two years.
The concept of decentralization is beautiful in theory, but hard to achieve in practice. Take for example Bitcoin and Ethereum — in a way they are decentralized. If you are using the Ethereum network to write information on it, you are writing the information on a decentralized network — it is tamper-free, can’t be altered, it is visible for everyone.
However if you look at the mining pools that keep Ethereum and Bitcoin alive — 3 pools account for more than 50% for each of the networks. Should they organize to collude for a hard fork, decentralization is gone. In other words, decentralized technology itself does not guarantee decentralized outcomes.
The case with DAOs is similar — introducing weight on voting based on economic incentives could eventually end in collusion too. When MakerDAO voted on introducing multi-collateral DAI in November 2019, 150 unique MKR token addresses took part in the vote, but eventually just five addresses represented more than 50 percent of voting tokens. Even more, recently a vulnerability in MakerDAO's smart contracts was wound allowing hostile party who has acquired 40,000 MKR (about 20,000,000 USD) to steal all of the collateral in Maker DAO, both DAI and SAI, along with assets from Compound, Uniswap, and other Maker integrated systems (over 340,000,000 USD).
Eventually most attempts for decentralization of systems end up in forming central points of power — take open source organizations like Linux for example, or the Ethereum foundation . This is just built into human nature and history shows that we always end up there.
Now, let’s look at why decentralization can be a mess for specific organizations.
Our community can participate in building AdEx in two ways:
1. You can collaborate and propose changes to the existing code base; and 2. You can fork it and start making changes by yourself.
This is all possible because we’re an open source project and our code base is publicly available.
But this code was built by people working full time everyday on it. It is a result of years spent on research, testing and development. We are sure there are talented developers and researchers in the AdEx community, but how many of them have the same specific cumulative knowledge as the company?
If we were politically decentralized and had to vote for every important decision on the product together with the community, would 51% of the community be prepared for that and ready to spend as much time as us on understanding the proposed decision?
To use a simple metaphor: What do you prefer when you have flu symptoms — rely on the centralized “doctor” institution, or post pictures of your sore throat on a forum and wait for a consensus on your diagnose?
In our case, it all boils down to the specific service we’re providing — and the business acumen, tech knowledge and deep understanding of the ad tech industry that are necessary for AdEx to be a viable service and company.
Decentralization? No, accountability
In a popular article on decentralization, Nathan Schneider wrote:
We should care less about whether something is centralized or decentralized than whether it is accountable. An accountable system is responsive to both the common good for participants and the needs of minorities; it sets consistent rules and can change them when they don’t meet users’ needs.
Yes, AdEx stands for decentralized advertising. What matters to us is that advertisers/publishers have as much control and transparency as possible without compromising the product, as well as full custody of their funds. Payments on the AdEx Network go directly from advertisers to publishers, without AdEx being able to manipulate or hold them in any custody. This is decentralization and is very beneficial to our users - it introduces trust and accountability on spending and adds comfort to publishers, knowing their earned funds can't be simply taken away. Furthermore, prices of the ads on the AdEx market are entirely influenced by the current demand and supply on the platform, in other words - it' up to the advertisers and publishers.
On the other hand, we believe that as a company we are accountable to our community, and that we should be open to the community’s ideas and needs. We are communicating daily with it on our channels and we often support hackathons, Ethereum community events and soon — local meetups.
We don’t believe that AdEx Network would be functional and deliver a quality product if it was a “decentralized” organization, but we will always encourage multiple forms of participation for our supporters and friends.