1/8 Short thread on decentralization, permissionless-ness, and robustness, which should all be ultimately synonymous. As many have correctly pointed out recently, it is the permissionless nature of crypto that makes it valuable.

2/8 But such openness needs robustness. A centralized system can be permissionless for some time, until it no longer is. Obviously, it can come to a crippling halt when it becomes seized by authorities or it simple goes down due to errors.

3/8 Decentralized systems are permissionless, and thus valuable, because they reduce the probability of such forced forfeitures or accidental halts. Unfortunately, the current ecosystem of decentralized network paints a different picture.

4/8 While most of the largest blockchains may have good token distribution, they hide the ugly truth that most of the power that is actually doing the full block production is increasingly centralized.

5/8 What's worse is that protocols like Nakamoto consensus incentivize centralization as the more hashpower an entity has, the more the expected payout. In fact, as shown by selfish mining, around 30% hashpower starts creating increasingly higher than 30% block rewards.

6/8 At around 40%, you start accumulating far more than 40%. This is a serious problem. The coins in the system might be distributed, but forfeiture or halts due to centralized operators is quite high.

7/8 Conversely, in most proof of stake protocols out there, there is an incentive to delegate that again pool resources together into the same hardware or staking service provider.

8/8 There needs to be serious work in designing protocols that incentivize *hardware* dispersion, thus decreasing correlated failures or any forced forfeitures. It's not just about token decentralization, although that's very important. We must decentralize the hardware. Fin.

CC @hosseeb @hasufl @gakonst on thoughts.