Decentralization refers mainly to the distribution of decision-making power. The quality of decentralization and security determines the degree of trust that users place in the network.
Decentralization is key to the success of blockchains, as it allows users to be their own bank. By eliminating the need for a third party, users can transact with each other securely and without fear of censorship or interference.
Decentralization also means that no one entity has control over the blockchain, no one can make decisions on behalf of the network, resulting in a more secure and reliable system.
Decentralization also creates transparency, as every transaction is recorded in a public ledger and can be seen by all users. This enhances trust and creates a more secure environment for user transactions.
Finally, decentralization ensures that the blockchain is resistant to attacks and manipulation. With no single point of failure, the network is more secure and less vulnerable to malicious actors.
Cardano’s Proof of Stake system is designed in a way that ensures high security and motivates to maintain a high level of decentralization through economic and incentive models. Cardano has its cryptocurrency ADA, that has a value to reward network consensus participants for honest behavior and high quality service. In addition, it can motivate participants to hold the coins, thus keeping decentralization at a high level.
The inevitable part of decentralization must be governance of the project and voting by stakeholders on the development of the protocol. The network must have a project treasury so that developers and researchers can be rewarded.
The Cardano network will produce new currencies that will be gradually distributed as a reward. This revenue resource is limited in time to about ten years. The second source of income is transaction fees and fees for the deployment of smart contracts. Initially, the new coins will play a major role in the reward program since many transactions may not be processed. It is expected that after ten years, as many commissions will be collected to cover the rewards. The creation of new coins will gradually be replaced by the collection of commissions.
PoS does not rely on physical resources such as electricity. Therefore, the cost of operating a node is low. Relying on the collection of commissions depends directly on the scalability of the protocol. The more transactions per second that are processed, the more commissions can be collected. If millions of people use the Cardano protocol in the future, then the commission can still be economical.
Ouroboros’ security budget is always present and protects the network against 51% attack. The delegated ADA currencies form the security budget, and an attacker would need to possess more than half of the delegated currencies to be successful. The security budget depends mainly on the market price of the coins. It does not depend on the network’s subsidy or on the fees collected. This is a great advantage from a security point of view as the attack is very expensive. Just try to count how many coins you would need to buy in order to have a chance of achieving the 51% attack. Ouroboros motivates people to own ADA coins and delegate them to pools.
In the case of PoS, the distribution of cryptocurrencies is essential. A fraudster could possess more funds and if he had a large number of coins at his disposal, his chances of committing a successful fraud would be just as difficult.
I appreciate your contribution to encourage my articles
₳da (Cardano)
addr1qxdlld4mux6gl38860w297lse59m0646v68x6sraw0asp85ml7mthcd53lzw057u5talpngtkl4t5e5wd4q86ulmqz0qskgn43
