Decentralized VPN: Explained and Compared

Introduction to Decentralized VPNs

A decentralized VPN (dVPN, for short) runs on a network of distributed nodes operated by other volunteers in the same network. As with traditional VPN providers, your internet traffic is encrypted, and your IP address is hidden, but the means of achieving it differ.

Rather than relying on one server to handle your data, a decentralized network is used where each volunteer can access the data to some extent. Distributed Ledger Technologies (DLTs), such as blockchain, implement transparency among participants.

Independent users run their own devices, usually home computers, to host a node that acts as a VPN provider handling requests. Often, volunteers are rewarded with cryptocurrency for contributing to the VPN service.

The idea is to eliminate the control one actor might have when creating a secure internet connection for others. In theory, it minimizes the risk of data leaks and ISP or government interference.

In practice, however, due to the open nature of a decentralized VPN network, new security risks are created. Many of these threats are invisible to a casual consumer.

How Do Decentralized VPNs Work?

From the user's perspective, a dVPN and a VPN service don't differ much. Your money goes to users who rent out their IP addresses instead of a company, but that's about it.

You get to install software to connect, choose locations, encrypt your traffic, and even get some other security features. As with traditional VPNs, most decentralized VPN services also cost fixed subscriptions.

On a more technical level, decentralized VPNs are closer to peer-to-peer (P2P) networks, where devices with equal permissions are linked together. Open-source dVPN protocols are used to create rules for routing, tunneling, and encryption.

The latter works a bit differently than with a traditional VPN provider. Instead of encrypting data and sending it through one server, dVPNs can divide data packets and distribute them among multiple nodes in the network.

In such a way, encryption is decentralized at the expense of performance. However, it isn't layered as in the Tor network, so it's still the same protection as with a traditional VPN service provider.

Any device can become a node by acting as a small temporary server in a decentralized network. In fact, many devices on such networks are users and contributors at the same time.

When a device becomes the last exit node, its IP address is used to conceal the original requester. Due to the P2P nature of a decentralized VPN service, such nodes are public and visible to anyone online.

Advantages of Decentralized VPNs

• Censorship resistance. The main advantage of dVPNs is that they are easier to use in countries where VPNs are outlawed. It's more difficult for governments to spy on or shut down decentralized VPN providers.

• Decentralized logs. While technically, your usage data is kept, there is no server storing it all. Logs are mixed with other users and spread out over the network.

• Lower risk of centralized breaches. There's no one service provider that hackers need to breach for user data. However, smaller network infiltration and data breaches are still possible.

• Location targeting and encryption. Just like a traditional VPN provider, a dVPN will allow you to choose locations and encrypt your data.

• Earning possibilities. You can earn some Cryptocurrency if you are willing to turn your home device into a decentralized VPN node.

Decentralized VPNs VS Traditional VPNs

While dVPNs have advantages, it's clear they aren't a silver bullet for privacy when compared to conventional VPNs. As seen in the table below, most of what a dVPN accomplishes, a traditional VPN service provider does better.

Applications of Decentralized VPNs

A conventional VPN should be your preferred option for daily privacy needs, but it doesn't mean that dVPNs don't have their own applications. There are at least two scenarios where a decentralized VPN should be considered as one of the top options.

As an alternative to a free VPN

It's known that free VPNs should be avoided. At best, you'll be bombarded with ads, and at worst, you might get your data leaked. A decentralized VPN might be a better alternative for those on a shoestring budget.

Potentially, you can contribute to a dVPN network to fund your VPN needs. If you participate in the network enough, the earnings and costs will even out, and you'll get an almost free dVPN.

High censorship countries

Perhaps the most popular reason for using a decentralized VPN is to protect yourself better from authoritarian governments. Activists and journalists find it valuable as it's more difficult to take down.

It should be noted that most decentralized VPN providers do not use multi-layered encryption, and only one node is used at a time. So, the Tor network, although with similar performance drawbacks, might still be a better choice.

Legal and Ethical Considerations

There's nothing wrong with routing and encrypting internet traffic from your device. It might even be a profitable side hustle earning you cryptocurrency. If done right, security risks are minimal, but ethical and legal concerns remain.

Where there's money, there are bad actors tricking people. Their schemes apply to decentralized VPN networks quite well. Mobile apps and other software are created with the intent to use devices as nodes for a dVPN service provider.

Sometimes, the permission is hidden in overly complicated terms and conditions, which is unethical at the very least. In extreme cases, routing your internet traffic through them might even be illegal. The nodes for a decentralized VPN might be created using malware.

These are rare cases and probably more of an exception than a rule, but you can never be sure as a user. A centralized VPN provider can be audited and tested, but a decentralized VPN service doesn't have one authority to take full responsibility.

That's why dVPNs are a double-edged sword. On the one hand, they are more difficult to censor and take down. On the other, you can never know how your VPN IP address was sourced and whether it's infiltrated.

Conclusion

Decentralized VPN providers are functioning with good intentions, but the decision ultimately relies on credibility. Will you entrust your data to hundreds of volunteers handling it for crypto gain, or is it better to go with one legitimate service provider? The choice is yours to make.