that means centralized Blockchains are not that good or of no use?
Not majorly, and this is because Blockchains serve various purposes, and these may require them to be centralized.
According to the report of Crytpo asset Taxonomy, about 16% of crypto currencies are said to be fully decentralized. The other crypto currencies reviewed are either centralized, or only semi-decentralized. Only 9% of all utility tokens were found to be sufficiently decentralized and only 7% of financial assets such as those born from initial coin offerings are decentralized [9, 10]. Crypto currencies such as Bitcoin, Stellar, Litecoin that work primarily as a payment method are among the most decentralized types of crypto assets, as per the report.
While the original crypto currency—Bitcoin, was designed and developed to be decentralized and removing the control of governments or any central organization, some experts claim and suggest that even Bitcoin can’t be termed as fully decentralized since a majority of the Bitcoin miners are from China.
1.7 Conclusion
Decentralization is a process that is beyond and above the computers and networks. It involves organizations and individuals in plural. Partial decentralization can be achieved at present [8]. However, the complete decentralization is very difficult to accomplish and it would take time for the Blockchains to become truly decentralized, if they intend to do so. It will not only involve Blockchain Technology but also artificial intelligence algorithms that would replace humans to eliminate biases.
1.8 Regulatory Challenges
A blockchain is a type of distributed ledger technology can be termed as DLT, consisting of a decentralised network of fixed or unchangeable databases, shared equally across the system. In the very beginning age of development of blockchain technology, blockchain has shown great potential in different areas from crypto currencies to smart contracts and so on [10, 11].
During the opening of the European Blockchain Partnership, Mariya Gabriel, EU Commissioner for Digital Economy and Society, clearly and boldly mentioned that “in the future, all public services will use blockchain technology”. As this tending technology continues to develop and attract keen attention and consciousness, regulation of blockchain is becoming an important and needful discussion.
In the fourth section of our Blockchain series, the regulatory measures and challenges associated with blockchain management are going to be discussed.
1.9 Obstacles to Blockchain Regulation
Being a decentralized system of network, blockchains are treated as the most strenuous technology and that’s the considerable reason to manacle it into strict regulations. Due to the innovative and dispensed nature, blockchains create numerous problems for regulators [12]. As it is already defined and know that Blockchains are distributed and decentralized. As a result, the nodes or sub systems within a network can be placed all around the world, without a definite ‘home-base’, making the question of legal jurisdiction complex.
The structure of blockchains creates issues concerning liability and accountability as un-authorized public blockchains have no form of a central authority or decision-maker that can be held responsible for the actions carried out within the network [12].
Apart from this, within a blockchain, data is shared across every node or participants of the network, each maintaining a full replica of the database. This case makes the situation more difficult as the real owner of the blockchain couldn’t be determined or is quite difficult to be judge it for the already created blockchain [12−14]. This scenario presents a challenge where intellectual property is concerned, making it strenuous to determine the author or owner of the data.
Privacy is another great challenge for regulators of blockchain. Transactions are linked completely and solely to a network account address rather than a personal identification (PI number), apparently ensuring privacy. However, if a connection between the two node are made and on the same side it revealed, the protection of an individual(s) privacy is no longer exists [16].
1.10 The Current Regulatory Landscape
Blockchain regulation, like the technology itself, remains very much in its starting phase. Initiatives above the national level, such as the EU’s Blockchain Observatory and Forum, the European Blockchain Partnership and the Mediterranean Seven, focus on supporting its use and development, largely avoiding regulatory issues. This is because of a lack of consensus and harmony on blockchain and its applications; while some nations have treated it with suspicious eye, including China, although other countries such as Malta and Estonia have passionately and embraced it. This has made a regulatory landscape which differs from nation to nation [17].
Italian and Swiss agencies are among those that have chosen it to observe and check, for the time being, rather than embarking on the time-consuming process of developing and managing new legislation and policies that may soon be outdated given the early stages of blockchain technology development. “Switzerland doesn’t need new special regulations for blockchain”, asserted Ueli Maurer, the country’s Finance Minister [18]. The agencies of government have started opting to update and apply some new chances in their existing rules and laws to account for this novel technology.
Other nations have taken the some different kind of approach and have chosen to adopt and absorb some new national legislation, solely addressing and pointing sole aspects or specific applications of blockchain [17, 18]. Keen attention has been drawn up to the application of blockchain in the sector of finance and crypto tools and assets like Bitcoin. Countries such as Poland, France and Luxembourg have chosen to absorb some specific guidelines tailored to these issues.
Meanwhile, a few countries such as Liechtenstein have taken a more advanced and progressive and forward approach as the government has approved The ‘Blockchain Act’, which marks a milestone not just for Liechtenstein but for the international community which look at blockchain as a malicious and untrustworthy technology [19]. It provides the first holistic regulatory framework to govern the underlying concepts of blockchain.
1.11 The Future of Blockchain Regulation
Moving forward, regulators and policy makers will need to strike a fine balance when drafting blockchain legislation; overregulation will restrain development and also creates legal instability and uncertainty, which ultimately harms and affects the ultimate progress [19].
Blockchain must be regulated in such a way that accounts and support for the associated risks it produces while simultaneously encourages development of the technology. As such, legislation cannot simply consider current technologies but must seek and understand to be applicable to the generations of technology to follow.
Furthermore, while crypto and money explicit guideline is without a doubt fundamental, controllers should likewise embrace comprehensive structures equipped for directing the huge number of blockchain innovation applications, both now and to return. Non-money related applications are probably going to accomplish more footing and impact over the moving toward years, in this way requiring more noteworthy core interest.
Gauges will assume a vital job inside the route forward for blockchain, controlling its improvement and moving take-up by guaranteeing that the innovation supposedly is secure and solid [19, 20]. This pattern is starting to show up the same number of standard-setting bodies are connecting with the issues identified with blockchain and DLT. The International Telecommunication Union (ITU) has made a spotlight Group on Application of Distributed Ledger Technology devoted to the occasion of DLT principles [21]. The Institute of Electrical and Electronics Engineers
