Factors Affecting Decentralization
Decentralization, in essence, deals with the aspect of the distribution of control and decision-making powers in blockchain and cryptocurrency networks, rather than by a single entity. A number of factors put together describe the level at which decentralization may be said to occur within one blockchain system or another. These are:
Consensus Mechanism:
The most important one is the consensus mechanism type. The PoW networks, like Bitcoin, are doomed to centralize over time: their mining process requires extremely expensive hardware, placing consequently most of the supply of mining power in the hands of a few rich entities. Proof of Stake and Delegated Proof of Stake can be more decentralized, though DPoS often centralizes control among a small group of elected validators.
Distribution of Validators/Nodes:
The more the number of validators or nodes are geographically and institutionally distributed, the more decentralized it will be. If a large portion of network validators is at the discretion of a few entities, then the result will be centralization, which further increases risks of collusion and manipulation.
Economic Barriers:
Of course, another issue considered by decentralization is the financial requirements that come with participating as a validator or miner in an ecosystem. This is because, under PoS systems, validators must stake large amounts of cryptocurrencies, which could remove the smallest participants and grant great power to the richer stakeholder.
Governance Model:
Decentralized governance is also an asset: decisions about how to modify the protocol are voted on by a broadly dispersed base of users or stakeholders. Conversely speaking, these are hampered by centralized governance models that restrict control to just a few influential players.
Put differently, decentralization is a concern of the technical, economic, and governance factors. A blockchain network will be resilient, fairer, and more trustless, the more highly decentralized it is.
~ Regards,
VEIGO (Community Mod)
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I believe that decentralisation is the key in crypto market and this should not be touched instead this should remain intact. The components that you have discussed for decentralisation are really important and without these factors we can't call any project as a decentralised one.