Centralization is dead! Long live centralization?

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"Centralization" is not the real problem. "Conflicts of Interests" are. Part 2 of 5 - Consensus IS Power series

Why Centralization is never going away:

Because centralization is not inherently bad, and likewise decentralization isn’t necessarily good.

Be wary of those presenting issues on a scale of extremes, for they are likely just trying to influence you to their side.

Centralization and Decentralization have fundamentally different purposes

And both are solutions to different problems. As covered in part 1, the purpose of decentralization is the disintermediation of existing middlemen entities draining value from economic networks.

Fundamentally, the only reason to decentralize, is to improve security, from either external or internal threats.

 

You wouldn’t store all your eggs in one basket; something may fall on the basket and crash everything, and being all in one spot makes them easier to steal.

Because centralization is better at every other task than security.

 

Using the same easy example, decentralization means “don’t put all eggs in one basket”, but that doesn’t mean you shouldn’t use baskets at all. 

Baskets (=designated “centralized storage” points) are very useful! You wouldn’t store your eggs in your pockets, even if, indeed, you can.

 

Overall, your eggs storage system will be better as a hybrid, combining the best of both approaches.

Why Centralization will always happen

Some more, some less, we all value our time, our convenience, comfort, security & more. Centralization in business networks provides a large number of benefits to individuals.

Say you grow vegetables in your garden and want to sell them. Chances are you’ll go to the local market, rather than door-by-door to find willing buyers. You save time, effort & money by complying with the terms of service & participating in something bigger than you, allowing you to focus on scaling sales instead.

 

In this example, the market will provide you with a variety of benefits that would otherwise be out of reach: a larger audience, pricing awareness of all other sellers, and even protection from theft and other forms of abuse.

In fact, blockchains provided us with tech enabling global, secure & trust-less transactions, so you could theoretically buy all your crypto assets from privates without ever paying an exchange fee.

Yet most all of traffic still goes through exchanges.

So...centralization good? why is everyone trying to get rid of it?

The problems inevitably arise over time; using the same example:

 

The markets will expand, compete and betray one another for dominance, until few remain. Users/consumers then must go to one of the surviving competitors for the service or goods they’ve come to rely upon in their daily lives. It’s happened a million times before and it always ends the same: it’s how monopolies are formed.

 

The result is control. Fast forward and you get 2020.

The real problem is Conflicts of Interests, not Centralization

But the former is a byproduct of the latter

This is the fundamental reason why oversight institutions tied to local jurisdictions (e.g. national, federal) were created in the first place: to prevent private interests of overly successful corporations from undermining those of the State, and of the public that directly enables their success.

Unfortunately, this hasn't always worked. For who enforces on the enforcers? who watches the watchers?

This problem never had a completely satisfactory answer throughout the history of humanity. The best we could come up with is “ethics & values” binding the institutions to certain standards of conduct, which are then enforced through oversight appointed by legislation, allegedly.

 

And this is where Blockchain technology can make a true and meaningful impact on society, for it can be used to create replacements for existing intemediaries, built to prevent conflicts of interests from arising in the first place, through automation.

Endemic corruption and inefficiency are why blockchain has value

Society has grown bloated with questionable (at best) middlemen and bureaucracy, and is rife with conflicts of interests, typically all of which pass on costs to consumers and/or taxpayers, to the detriment of the general public as a whole.

This is, ultimately, the reason why there is substance to the “blockchain economy” and its associated popular movement.

Fixing existing conflicts of interests is a nightmare

However, the recent tech innovations do allow us to do the next best thing: replace them with better versions of themselves, capable of preventing the human-borne issues of intermediaries.

 

You see, there are intemediaries of all kinds, some are there to check you, some to check your transactions, and other merely place their stamp of approval confirming applicable policies & rules are follow. 

We can't just get rid of intermediaries

Because the role they cover, and the function that they serve is both legitimate and needed. At least in most cases.

 

Basically, we need to keep the “stamps”, but we can now get rid of the “stampers”, and replace them with self-enforcing procedures. 

Blockchain's purpose is to return ownership into the hands of end-Users

“A correctly executed blockchain strategy involves disintermediating the incumbents, nullifying the middlemen or - even better - redistributing the upside to the very people (uber driver, bnb host) or software contracts now providing the service.

 

Blockchain Behind the Bullshit (’18) – Stephan Tual, former CCO of Ethereum

And this whole Blockchain Economy, now growing in intensity worldwide, is already rooted in the widespread desire for new opportunities and the hope for better economic systems. To be designed for the benefit of the masses of end-Users, rather than well-positioned insiders and mega corporations.

 

In truth, the people are right: decentralization should be an outcome.

Then why hasn't it been delivered?

As we suggest in the title of this series series the issue lies in achieving and preserving consensus, because of a fundamental conflict of interests between owners and users.

You can't expect established middlemen to deliver decentralization

Because they are bound to the interests of their shareholders, and those interests are aligned in the pursuit of profit. 

They’ve nothing to gain from it, and everything to lose.

True Decentralization must necessarily be introduced bottom-up

From and by new players, innovators and disruptors capable of establishing entirely novel business models leveraging the possibilities provided by these new techs, in ways that would not have been possible before.

 

Throughout this series we will explain to you why, and perhaps inspire you on how to practically do so. Click the button for more info about us.

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We're building the 1st S-DEX (“Self-Decentralizing Exchange”) – a market intermediary using a custom blockchain solution to transition its holding entity into a non-profit over time. Why, you ask? 
To fulfill blockchains' true purpose: so that we can redirect platform generated revenue to our end-Users instead.

Lorenzo Ferrari | CryptoArena CEO Tweet

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Lorenzo Ferrari

Lorenzo Ferrari is the Founder & CEO of CryptoArena.org, a fintech startup aiming to launch the first “Self-Decentralizing Exchange” – a secondary market intermediary using a custom blockchain solution to transition its own holding entity into a fully non-profit Foundation. 

CryptoArena distributes platform-generated revenue to its (active) Users through a game-like, social-competitive, points scoring system. Incrementally, over time, 

all the way to 100%.

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