Challenges and Reflections on Decentralization

Recently, a storm surrounding the US stock market has sparked renewed attention to Decentralization. This event not only reveals the vulnerabilities of the traditional financial system but also prompts a rethinking of the challenges faced by decentralized projects.

Bitcoin and Ethereum, as the two largest decentralized projects in the world, have been dedicated to exploring how to eliminate reliance on third-party guarantees since their inception. They have expanded new development boundaries for humanity and provided an innovative way of thinking. However, even Ethereum, which is highly decentralized, still faces significant centralization risks.

A notable event is that the server of a certain US stock discussion forum was banned, resulting in many retail investors being unable to communicate normally. The cause of this incident was the collective buying of a certain stock by retail investors to counteract the short-selling operations of Wall Street institutions. The actions of the retail investors caused the stock price to soar from $3 to over $300, triggering multiple trading halts and ultimately leading to substantial losses for the short-selling institutions.

However, the joy of victory was soon interrupted. The trading platform began to restrict buying operations for related stocks, allowing only sales. Some brokers raised margin requirements or experienced server failures. More seriously, the forum servers where retail investors gathered were directly banned, cutting off communication among retail investors.

The series of events highlights the risks that may arise from reliance on third parties and prompts a reevaluation of the importance of Decentralization.

As the world's second largest Decentralization protocol, Ethereum offers vast possibilities for open financial markets. However, due to its complex system architecture, the storage requirements are much higher than those of Bitcoin, which increases the difficulty of running a full node.

As a result, most developers have to rely on third-party servers. This widely used service handles about 13 billion code requests daily, providing developers with a way to connect to the Ethereum network without running a full node. However, this reliance also brings potential risks of Decentralization.

If there are issues with this service, it may affect the operation of the entire Ethereum network. More importantly, many commonly used Ethereum wallets and decentralized applications (DApp) rely on this service to some extent. This could not only lead to a decrease in the number of full nodes supporting the network but also pose risks of privacy breaches.

As one of the founders of the service stated, if they decide to shut down the service, many DApps may stop functioning. Although the relevant parties are working to reduce this dependency, it appears that most DApp developers and users are currently unaware of the seriousness of this issue.

These events teach us that when market interests are large enough and the influence of games and regulations is significant, we must be fully prepared for the worst-case scenario. This is a matter that all Decentralization protocols, especially applications on Ethereum, should take seriously and study in depth.

The road to Decentralization is still long, and we need to continuously reflect and improve to build a more robust and reliable decentralized ecosystem.