Decentralization will have great potential for the future of the internet and the financial sector. When it comes to why Decentralization does matter, one has to take a look back at the very beginning of the internet and the current challenges that have to be overcome.
The early days of the internet
Back in the early days of the internet, open protocols were the foundation that internet services were built upon. Under the control of the larger internet community, these protocols ensure that individuals or larger agencies could develop and maintain an online presence, without the worry of rules changing that might cause adverse effect to their efforts. During this time, an era that endured well into the early 2000s, many major web players came into existence, including search giants like Google and Yahoo, not to mention social network stalwarts like Facebook and LinkedIn. It was also during this epoch of the internet that centralized platforms became more and more insignificant.
Massive tech companies with a for-profit mentality would dominate the next epoch of the internet. Online behemoths like Google, Apple, Facebook and Amazon spearheaded developments that would make open protocols redundant with their diminished capabilities. One of the key reasons behind this was the advent of smartphones and mobile devices, with the widespread adoption of apps as a focal tool for internet use at the core. Open protocols services were largely abandoned as users turned to using centralized services with far more technical finesse. That’s not to say open protocols were entirely abandoned, however when these were utilised, it dependant on software and services from the aforementioned Google, Apple, Facebook and Amazon (GAFA).
Despite reservations, this certainly came with an upswing for users. Hundreds of millions of users could now enjoy access to a wealth of exciting technology services. With many of these services provided free to use in some capacity, smaller companies and startups now faced a significant hurdle when it came to establishing and developing their online presence. This was largely due to an uncertainty about when such centralized platforms might change the rules with little warning, severely denting audience reach and potential profits. A noticeable result has been the stagnation of innovation, with the internet and its content becoming more generalised. Conversations about state-sponsored bots and fake news, harmful algorithms and throttling privacy laws have become hot topics in recent years, with the trend set to continue.
Today’s internet era
Much discussion has arisen on how to combat this centralisation and its effects on the internet. One strategy is the government-imposed regulation, largely targeted at bigger internet presences. However, this tactic is fundamentally flawed in that it’s based upon archaic assumptions about communication networks of yesteryear. TV, radio and other communication networks of the past are drastically different from the internet, with the former relying on hardware and the latter composing of a software-centred infrastructure. A network dependent on hardware is less inclined to change once developed, whereas a software-based network can be re-optimised and restructured later.
There’s no better example of a software-centric network than the internet itself. Any computer that’s connected to the internet can, almost without limitation, run any specific software selected by its user. Software design is a limitless enterprise and, when a good idea is generated and an innovation in software is developed, this can quickly spread to wider use.
It’s worth remembering that the internet is still in relative infancy. The services that form the core of its current usage will likely change substantially in the years to come. Such a seismic change will undoubtedly be made possible by the rise in crypto-economic networks. The basic principles of this type of network was first introduced and subsequently developed by cryptocurrencies like Bitcoin. These type of networks bring together the most alluring features of the early eras of the internet. Not only are they governed by a community, they stand as decentralized networks that will quickly advance even the most sophisticated of centralized alternatives.
Why is decentralization so important?
When thinking about the crucial need for decentralization, it’s important to fully understand the concept. One of the biggest misconceptions about decentralization is that it helps avoid control and censorship by state governments. This is simply not true.
Instead of leading with myth and misconception, it’s worth focusing on the problems and redundancies of centralized platforms. There’s no better illustration of the problems then the obvious life cycle of such platforms. At the beginning, such platforms go above and beyond to amass users and attract third-party support. The aim of this is to increase the worth and value of services. As platforms become more popular and profitable, so does their control over platform users and third-party affiliations. However, the perks to the user quickly dissolve when such platforms refocus their growth tactics. At this point, data mining from users becomes a more profitable venture, while out-competing offerings from affiliated third-parties becomes commonplace.
Due to this, third parties have become savvier to developing atop centralized platforms. Users are also becoming more aware of their online privacy and availability of sensitive data, while also expressing concern over online security and breaches. Such problems attributed to centralized platforms are a ripe topic and likely to become more so as time goes on.
The rise of crypto-networks
Crypto-networks are easily enough to understand. They are networks developed on top of the internet itself, utilising mechanisms like blockchains for maintenance and updates. They also encourage participation for mining and validation from network participants through the use of cryptocurrencies. Such networks have different intentions. Some like Ethereum, take a more general approach to platform programming, while others have a keener focus on value storage. Yet more networks orient their focus on decentralized storage of files or carrying out complex computations.
In the early days of developing internet protocols, it were specific groups or non-profit agencies who worked behind the scenes. Here, there was a reliance on common interests within the wider community in order for such protocols to become commonplace. It might have worked well as an approach in the 1990s, but since then, very few new protocols have become widely accepted. The incentive approach of crypto-networks alleviates the problems here, giving participants a clearly defined voice in the form of community control. The common goals of encouraging the continued growth of a network and appreciation of value of a cryptocurrency has ensured that such networks continue to prosper.
However, even the most successful crypto-networks hare hampered by various limitations that prevent them from becoming a significant challenge to centralized networks. These limitations are largely due to performance prowess and the scalability of such networks. In the coming years, these will be key focus areas as such networks continue to develop.
How decentralization can prosper over centralized platforms
It’s clear as to why decentralized platforms should win out over centralized ones, but that victory is easier imagined then realised. However, there’s plenty of reasons to be optimistic about the outcome.
For one, web services and web software are the products of dynamic developers, with millions upon millions of such developers at work across the globe. Only a minority of the overall number of developers out there actually work for larger companies that currently enjoy dominance, helping level the playing field. It’s also worth noting that many of the most dynamic shifts in software development were the result of startup activity or created by the ingenuity of community-based development teams.
Centralized and decentralized systems should be looked at from the perspective of viewing them as processed, rather than end products. While centralized systems often begin life as fully-formed entities with much to appreciate, they can only evolve and improve with the right investment and ingenuity behind the scenes. The rate of such growth and improvement is dependent on it. However, with decentralized systems, exponential growth and innovation can be achieved quickly, in theory, so long as new contributors are consistently attracted.
With crypto-networks, the open field of contributors and interdependencies of their infrastructures help encourage such growth. What’s more, the rise in incentives like cryptocurrency tokens/coins can also encourage a faster rate of growth and development. Deciding on who will win out in the next era of the internet in the war between centralized and decentralized systems is ultimately about who produces the most innovative services. This will undoubtedly attract the best developers to one side or the other, encouraging further innovation and success. Admittedly, the likes of Google, Facebook and other tech giants have the advantages of substantial financing, massive amounts of existing users and the like, but crypto-networks have their own distinct strengths. Crypto-networks are a much more attractive option for those developers looking to tackle something new, while entrepreneurial enterprises locked out by the likes of GAFA can also find a home. With the right conditions, crypto-networks have the potential to mobilise rapidly and quickly outpace the product offering of the heavyweights.
Decentralized platforms are often overlooked in their beginning stages. Whereas a centralized system is often launched with a full suite of apps and other features, decentralized platforms might appear unclear in their usage and require subsequent product/market research phases. First, the platform needs to attract the right investment to support its development and the developers who will spearhead its development. Then, the product platform must be reconciled with its user demographic. Many outside onlookers see this two-part process as a significantly difficult hurdle to overcome. However, this often translates to underestimation of the potential promise of a decentralized platform.
What to expect in the future
It would be foolish to expect decentralized networks to completely solve all the issues currently encountered with the internet. However, they offer a much better chance of solving them than centralized ones do.
There’s many examples we can already consider to prove this. Take for instance spam mail as one example. When it comes to email spam, a great deal of individual companies have resolved to try and tackle the issue, with a great wealth of innovation working hard to come up with solutions. A huge amount of investment, both from corporate financing and venture capitalist investment, has gone into backing such endeavours. Admittedly, spam is still an issue in the realm of email, but it’s drastically improved compared to only a few years ago. One of the chief reasons why such enterprise has been deployed to target email span is that the email protocol itself is decentralized, meaning that individuals knew they could build upon it without having to worry about the potential of rules changing subsequently and quashing their efforts.
How a network is governed is another key area of focus. When it comes to large centralized platforms, it’s ridiculous to think that important decisions and actions are attributed to a select few individuals or groups. These agencies decide how content is ranked, how content is filtered, how users are managed and so on. With crypto-networks, a community-governed approach ensures that a truer democracy is realised. A democratic approach isn’t always problem-free, but it’s certainly a lot more preferable to decisions being dictated by a select few.
Ultimately, the enduring dominance of centralized platforms has meant that many have neglected to consider that there are superior ways to structure and develop services. With crypto-networks, it’s becoming easier to develop networks owned and governed by a community of users, while providing a more open environment for third-parties to create and develop. Decentralized systems were once a valued component of the internet in its early stages and, with hope, such systems will become of paramount importance again.