Is Decentralisation Important?
“Democracy is the worst form of government, except for all the others that have been tried” — Winston Churchill
In crypto as we witnessed the growth of both centralisation platforms (CeFi) like CoinFLEX and decentralised platforms (DeFi), I have started to give some thought as to what would be a better system at the most important level, the source that has enabled all this innovation, the internet. I recently read a very powerful and must read piece written by Chris Dixon on this subject over 3 years ago. He is a Managing Partner at a16z and a Board Member of Coinbase (article link below). Along with summarising some of his thoughts below, I have also added my take on the matter.
3 Phases of the Internet
Open source — 1980–2000: internet services were built on open protocols controlled by the community. So anyone could build knowing that the rules of the game wouldn’t change later on. Google, Apple, Facebook, Amazon (GAFA) all started getting built & centralised platforms like AOL were greatly diminished.
Centralised — 2000 — present: these for profit GAFA companies rapidly built software and services that outpaced open source systems (aided by smart phones and particularly the iphone launch in 2007). App developers migrated to these centralized services and even if you used open source software you would still need to engage at some point in the journey with these giant Companies. In addition often the GAFA companies charged excessive rent (30%) for these developers to be able to access their app stores.
This rapid growth was fantastic for consumers but meant that as an innovator you were controlled by these giants. In the instances where you managed to build without being entirely dependent on their software and services, they would buy you with what appeared to a cash strapped start up as fantastic valuations that were too tempting for founders to ignore. As one of the former Head of Acquisitions at one of the GAFA’s once told me, they had been buying over 250 entities and IPs per year!. They would either merge these acquisitions into their platform or much worse, mothball the tech and IP’s that didn’t immediately fit into their roadmap but could be of interest at a later date as they were promising innovations. This greatly stifles ongoing innovation and the creator economy.
In addition, having to pander to investors for ever increasing quarterly numbers, these corporations typically choose to squeeze more juice from their customers and that means more and more use of customer data for monetisation. The boundary between what’s reasonable and outright privacy breaches become greyer and greyer.
Decentralised — Web 3.0: the 3rd phase of the internet. Hardware based networks are different to the internet and once built are difficult to dislodge. Software based networks can be entire re architecture over and over again with relative ease. As Chris Dixon said: “software is simply the encoding of human thought, and as such an almost unbounded design space”.
Crypto networks combine the best features of the first two eras, community and decentralisation and provide incentives to the community, developers and network participants in the form of tokens. As such this encourages innovation as entrepreneurs and developers know that the rules of the game will not change as they are not being controlled by monopolistic or oligopolistic businesses and also that if that were to happen, they could dump their tokens, fork the code and keep building on another branch.
All these factors give the internet a chance to return to its roots and allow decentralisation the opportunities to win the third era of the internet. By winning this battle, everyone benefits. Consumers start to control who sees their own data and get to monetise their own data by dealing directly with each other rather than necessarily through an intermediary. As someone on twitter succinctly put it recently, for users, the internet will go from read, read/write to read/write/own.
Crypto is seen as the winning of financial freedom and one area where it really would excel is as the economic mechanism or payments rail for Web 3.0. In my lifetime I hope to see not only financial freedom for all but freedom of choice, choice of who sees my data and where I choose to get my information. Democracy and democratic systems aren’t always perfect but they sure beat dictatorships.
Credit: https://onezero.medium.com/why-decentralization-matters-5e3f79f7638e
