Centralization vs Decentralization

What are the systems you trust today in the world? At this very moment, how much does the world know about you? Do you trust the companies and apps you use? How much say do you get in your control over your own assets and data? If today the bank decided your account had zero dollars in it, what would you do? If Facebook decided to sell all your profile information and location data to the government, or if your phone company traded your everyday conversations to a third party, what could you possibly do to stop this? What control do you truly have?

You are not at the top of those hierarchies. You are merely a participant.

As I began to investigate the original research papers on Bitcoin, blockchain, and privacy, it became clear to me that centralization of power is a lurking beast we as a society have decided to trust. And rightfully so — centralization was created out of a time when no effective alternative problem-solving solution existed. Since then, centralization has shape-shifted to meet the many demands of society

“Centralization itself is not evil — it cannot be. It does not exist in opposition to anything. It’s just a concept, a point on a line, always in relation to something else. Over-centralization is the enemy — cycles of reconcentrating power amongst fewer individuals until systems collapse under their own weight.” — Tor Bair of The Secret Foundation

Centralized systems on the surface are not inefficient, from an economic standpoint. The problem with centralization is not efficiency, but the characteristics that are born out of an over-centralized system. Because of the relationship between centralized systems and the user, oftentimes the user has no effective alternative that does not contain the negative externalizations. For the longest of time, the negative externalizations of over-centralization posed a trinary choice: participate, choose a lesser evil, or sit out completely. Centralized systems are often imposed on individuals as a result of historical events they are wholly unaware of. Terms and conditions apply.

The US monetary system is centralized. Internet service providers are centralized. Your entertainment is centralized (Disney and Fox combined own 35 percent of the movie market). The servers holding your information for Snapchat, Facebook, and Instagram are centralized. Even farming in the twenty-first century is centralized!

Centralized systems are a natural human reaction to any sort of chaos that involves a large number of parties needing to come to consensus on how to do an action efficiently, and, in many cases, to “serve the customer.” No wonder the majority of businesses are authoritarian in structure.

Yet just because something is natural does not mean it is fair. And just because something is efficient for some does not mean it is efficient for all. Decentralized systems such as blockchain are an alternative solution to centralization, a solution created by human tendencies designed to solve the problems of the first millennium. Enter the twenty-first century, when we face problems inconceivable to past generations. The stakes are higher and a trusted alternative to centralization is desperately needed.

“A lot of people automatically dismiss e-currency as a lost cause because of all the companies that failed since the 1990s. I hope it’s obvious it was only the centrally controlled nature of those systems that doomed them. I think this is the first time we’re trying a decentralized, non-trust-based system.” — Satoshi Nakamoto, anonymous creator of Bitcoin

My book Building Confidence In Blockchain grapples with this topic. At our fingertips is a technology that solves the problem of distrust, centralization, and the possibility of executing transactions and contracts digitally without a centralized intermediary. Blockchain opens the door to truly peer-to-peer transactions, without human intermediaries sucking up value along the value chain of simply transacting from one person to another. Blockchain is not without its flaws; one of the economic levers that gives blockchain the ability to solve these problems (cryptocurrency) is in a constant state of fluctuation. But on a horizon not far from here is a world where those levers are stable, and the technology underneath emerges as a beautiful solution.

In this article series, I share excerpts and stories from my book, Building Confidence In Blockchain — Investing in Cryptocurrency and a Decentralized Future. I hope you enjoyed this post — if you enjoyed it and want to connect you can reach me here via email caw34769@bethel.edu or connect with me on social: (twitter) https://twitter.com/l_woetzel or (LinkedIn) https://www.linkedin.com/in/carter-woetzel-16936b136/ .

Also, you can also find my book on Amazon — here is the link to buy it: [Amazon Link]

Sources:

Tor Bair, “The True Enemy of Decentralization,” Last Modified February 26, 2018.

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Olya Green, “RE-imagining Money: Are the 700 Years of Centralization over Now?” Hacker Noon, May 6, 2020.

Vince Tabora, “The Evolution of the Internet, from Decentralized to Centralized,” Hacker Noon, October 27, 2019.

David Sims, “Hollywood Makes Way for the Disney-Fox Behemoth,” The Atlantic, Atlantic Media Company, Last Modified March 21, 2019.

“Why Decentralizing Social Media Makes Sense,” Social Media Explorer, November 20, 2018.

Kendall Thu, “The Centralization of Food Systems and Political Power,” Culture & Agriculture 31, no. 1, June 8, 2009.

Clay Fuller, “The Economic Foundations of Authoritarian Rule,” (PhD dissertation, University of South Carolina, 2017).

Sueur Cédric, et al. “From Social Network (Centralized vs. Decentralized) to Collective Decision-Making (Unshared vs. Shared Consensus).” PLOS ONE, vol. 7, no. 2, 2012

AlgoShare, “To Centralize Is Human, to Decentralize Divine,” Last Modified November 20, 2018.

Satoshi Nakamoto, “Bitcoin Open Source Implementation of p2p Currency,” Satoshi Nakamoto Institute, Last Modified February 15, 2009