Likely inconsistencies of decentralized systems

Updated: Mar 5

By Lumai Mubanga. mlumai@gmail.com



Almost all decentralized systems have some operational weakness. These weaknesses may result in serious inconsistences that may render the whole system difficult to manage as well as inabilities to censor malicious users. Like any other commercial or financial systems, decentralized systems are not immune to human abuse and misuse.


Let’s discuss possible inconsistencies likely to be encountered by decentralized systems. Before I dive into that, let us review briefly how a bank as an institution handles transactions on behalf of its clients, and then relate that to the Bitcoin system.


Banks manage accounts on behalf of clients. This is partly done by verifying legitimate owners of accounts and ensure that only the legitimate owner can spend the money available in the account. Banks achieve this by asking for identification before any transactions are done. Every transaction is traced back to the identity provided.


For each transaction, the banks transfer and redeem money on our behalf. We trust the banks to update our balances and keep track of all transactions. The history of all activities is given to the client in form of a bank statement. Thus, we trust the banks to undertake all these on our behalf. But, control and lack of freedom and privacy have been cited as reasons why there is need to depart from these established institutions and create the block chain technology. So, how does the decentralized system of crypto currencies fulfil the same roles, and what are the possible repercussions, or likely inconsistencies that may come with the technology?


In a quest to provide a high degree of privacy, identity and account management in crypto currencies is completely autonomous. Instead of asking the system to create identities, each user creates or generates an identity of his own. The identity is disconnected from a real world identity giving the user real world privacy.


When transacting, users transact in a peer to peer format without involving any third party organization, and these transactions are confirmed by the rest of the network. To make sure the information is stored, each user gets a copy of the ledger, which guarantee’s the integrity of data despite the presence of faulty computers that may be in the network who may record information dishonestly. This decentralization approach of record keeping removes the risk of a single point of failure.


What are the likely bottlenecks then?


1. Lack of accurate data and information. The absence of a central party gives way to lack of information regarding information about users. There is no one to ask.

2. There is no central party to censor or kick out malicious users who may be spreading malicious messages in the network.

3. Double spending attacks. This is an attack on the network were a value is spent more than its value. Thus, a virtual coin is promised to more than one person. This may lead to a lot of inconsistencies and cheating

4. A computer in the network can come and leave at any time and behaves in any way it wants.


The bitcoin network and the cryptocurrency space has however been trying to solve some of these through a block chain technology known as proof of work. This will be discussed later.


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