Centralization has tremendous advantages. Faster decision making. Stability. Security. Performance. There are good reasons to centralize. Facebook, Google, Amazon, Apple have amassed trillions of dollars of value – with centralization.
Which is why, when we hear fevered pitches around “Decentralization now!”, we should dig deeper into to the fundamentals and ask ourselves why (and in which scenarios) decentralized services could be better, and why it matters in the first place.
Merely getting rid of intermediaries with business as usual, is not a strong enough reason. And it’s not new anyway – value chains have been optimized for as long as business has been around. Similarly, arguments around “economic rents” also miss the mark. Blockchains charge economic rents as well, don’t they? They may be lower, but, again – that’s not what’s new.
The real value of decentralization is in high-scale exchange of ideas and innovation.
The largest creation of wealth comes from trade (exchange of goods and services), which now contributes to a majority of the World GDP. Decentralization, via blockchains, has the promise of enabling Peer-to-Peer exchange, regardless of arbitrary borders or custodians. This exchange is currently in the form of currencies – but will soon be in physical goods and services, ideas, software, services on blockchains.
Case in point: Why doesn’t LinkedIn provide a score on flexible work arrangements for employers? It’s not that they can’t – they have locations of 500M users, and could find out what percent are able to, say, work from home on Fridays. Having that data in hand could be important before you accept an offer with your new employer. There are Glassdoor reviews, but they are vulnerable to trust problems, spam, and may be from people very unlike you.
There are indeed people who need this, just ask any professional who has kids. Also, there are developers who would want to build this. However, centralized services like LinkedIn get in the way, because their current business models don’t allow for it. A product manager at LinkedIn probably has this feature in her backlog, but will backlog it because a small percentage of users (in their view) need it and there is “bigger fish to fry”.
Now imagine a world where you could exchange this workplace flexibility data with your peers, securely, anonymous, in a trusted manner, built by developers, incentivized through blockchain economics. How much more innovation could be unleashed, that has been bottled up for years because of centralization? How many more products and services could exist? Could long tail scenarios now be served – since we are all in the long tail at some point in our daily lives? Could I use my social personalization (locked up by Facebook) to get better search results in eCommerce (locked up by Amazon)? Or..gasp….could I imagine buying a Google Chromecast on Amazon without them fighting like kids, and not thinking what’s best for consumers?
This is the real reason for why decentralization matters. Unleashing untold innovation to the masses by getting rid of the gatekeepers enabled by centralized business models.