NTP-10: Structural Failures of Decentralization

Status: PUBLISHED
Authors: Danthur Lice
Date of Creation: 2025-05-29
Date of Publication: 2025-05-30
License: NCL-11

1. Scope

As part of the concept and dogma review series, this document presents a critical analysis of the decentralization model as applied to blockchains and distributed validation infrastructures. The goal is to demonstrate that decentralization, although frequently portrayed as synonymous with security and impartiality, fails to guarantee such technical and legal properties. The current model does not support traceability, auditability, or accountability, rendering it inadequate for regulated, contractual, or public-interest applications.

2. Normative Principles

Decentralization is technically defined as the absence of a single point of control or authority. In blockchains, this architecture allows any agent, known or unknown, to participate in block validation and the writing of immutable records. The expectation is to distribute trust, but the practical effect is the dilution of responsibility and the introduction of unmitigated structural risks.

The unrestricted acceptance of anonymous agents, without technical or legal qualification criteria, exposes the system to possible illicit practices. The same devices used as wallets also mine, validate, and operate nodes. This functional overlap compromises the logical separation of roles and makes it impossible to distinguish legitimate operators from malicious actors.

3. Systemic Failures in Decentralized Models

3.1 Participation of unknown agents

The absence of formal identification of a network node or agent prevents the application of any legal, contractual, or normative rule. There is no way to verify whether the infrastructure is proprietary, belongs to a legal entity, operates under authorized and legal jurisdiction, or complies with minimum operational security standards.

This model facilitates the entry of nodes of undefined origin and, under a statistically indeterminate risk, these nodes may be associated with illicit activities, asset laundering, evasion of financial controls, and clandestine network operation. The decentralized architecture imposes no constraints on participation.

3.2 Absence of objective accountability

Decentralization eliminates the concept of accountability. Errors, failures, delays, and abuses cannot be attributed to any party. The inability to assign responsibilities prevents SLAs, contingency plans, operational guarantees, and remediation mechanisms.

This model is technically incompatible with systems involving third-party rights, asset custody, civil contracts, or operations under state regulation.

3.3 Low-performance consensus architecture

Distributed consensus is inherently inefficient. The need for broadcast, quorum wait, multiple confirmations, and state replication imposes high coordination costs and low throughput capacity. Unless auxiliary architectures or technical workarounds are adopted, performance tends to degrade as the number of participants increases.

3.4 Hidden dependence on centralized infrastructure

Despite the rhetoric of independence, decentralized networks operate with direct dependence on private APIs, external indexers, monitoring systems, and explorers maintained by third parties. Without these central points, most users cannot interact with the network at all.

Decentralization in this model is formal, not functional. For example, in the event of a disaster recovery scenario, the network can only be accessed through central nodes or intermediaries that concentrate technical control and visibility of the startup process.

3.5 Lack of technical merit in validation authority

Validation authority is granted based on stake, hashpower, or participation time. These criteria do not assess technical competence, legal responsibility, service capacity, or operational integrity.

Control over the network is granted to those with greater financial or computational resources, with no link to the ability to be audited, sanctioned, or held accountable.

4. Functional Alternative: Central Validation with Public Accountability

4.1 Validation by an identifiable technical authority

Network integrity can be guaranteed by a centralized validated entity, with digitally signed logs, publicly replicated databases, and hashes available for independent verification. This eliminates the need for distributed consensus, reduces latency, and maintains external verifiability.

Trust arises from the technical and legal exposure of the validating agent, not from the absence of control.

4.2 Explicit and auditable responsibility

The architecture must formally declare which entity performs the validation, under what technical and legal conditions, and with what guarantees of continuity, availability, and compliance.

This enables the existence of SLAs, regular audits, contractual sanctions, a clear definition of obligations, and operational predictability.

4.3 Verifiable replication as a trust foundation

Trust should not depend on the dispersion of authority but on the public and auditable replication of network state. Decentralization seeks to avoid single points of failure. The proposed model establishes technically responsible points that are replicable and verifiable by any interested party.

5. Conclusion

Decentralization, as a technical premise, does not solve the problems it claims to address. It introduces latency, prevents accountability, hinders legal compliance, and transfers control to those with the most computational power or capital.

Security and trust in a network are not proportional to the number of validators, but to the ability to assign responsibility, audit decisions, and ensure operational continuity. The modern technical model must prioritize integrity, traceability, and verifiable responsibility, not the romanticization of anonymity.

NTP-10: Structural Failures of Decentralization

1. Scope#

2. Normative Principles#

3. Systemic Failures in Decentralized Models#

3.1 Participation of unknown agents#

3.2 Absence of objective accountability#

3.3 Low-performance consensus architecture#

3.4 Hidden dependence on centralized infrastructure#

3.5 Lack of technical merit in validation authority#

4. Functional Alternative: Central Validation with Public Accountability#

4.1 Validation by an identifiable technical authority#

4.2 Explicit and auditable responsibility#

4.3 Verifiable replication as a trust foundation#

5. Conclusion#