Why Decentralization Still Matters and How The World Got Carried Away
By Mathias J. Klenk – Co-founder and CEO at Passbase.
The Internet is a playground – one that has enabled some of the biggest innovations across recent decades. With the ability to access a number of products and services instantly from any connected device, it’s no wonder it has become a mainstay of most households and businesses around the globe. An enhanced digital experience is largely powered by tapping into data – data that can help companies decode user preferences, shopping patterns, payment choices, and other related transactions that have simplified our lives. A major part of this was enabled by centralized services. Although centralization proved to be useful for many, there are a number of evangelists who still believe decentralization matters. Tech entrepreneur Chris Dixon, arguably one of the leading venture capitalists in Silicon Valley, is betting big on decentralization. He highlights that decentralization can solve some of the biggest problems plaguing centralized services – be it through increased security or cost effective tools.
However, centralization did come with its perks. Users did not have to worry about not being able to access servers that had failed and data that hadn’t been backed up. They simply needed to purchase an internet service and rely on products such as Mozilla Firefox, Internet Explorer or Netscape to access the multiple services available on the internet. Some of the top players in the tech industry such as Apple and Google, Amazon and Facebook, developed services and apps that enabled this.
From providing free, convenient services, to experiences tailored to the user’s needs, there’s no questioning that a huge amount of value was created. These advances were celebrated as wins for consumers, but most people were not aware of the implications of centralization. The end result was that many of these companies had control over massive amounts of personal and sensitive data, and the risk of that information being stolen or abused increased dramatically.
What’s surprising is the fact that this wasn’t the initial plan for the internet. The primary intent, as planned by the Department of Defense, was for it to be decentralized. Here’s why a decentralized service wins:
1. Decentralization doesn’t rely on a single computer system to communicate with multiple hosts.
2. Decentralized systems are capable of withstanding unforeseen circumstances (e.g., war or a disaster) so if one portion loses some sort of functionality the other one is still operational.
The open nature of the Internet, albeit chaotic and unorganized, allowed for growth. Startups and business owners didn’t have to worry about regulations being modified by regulatory bodies or platform providers.
Blockchain technology was one of the more exciting aspects powered by decentralization. It removed the need for central authorities and handed control to the user – enabling them to decide what data to share and whom to share it with. Better yet, it removes friction across multiple online transactions. Imagine you had to move to a new place where you had to register for services that included banking and other subscriptions. Oftentimes, you’re required to prove your identity multiple times.
Blockchain technology garnered a huge amount of support from its evangelists. More than 80,000 blockchain projects rolled out with promises of ushering in a new era of computing. Capital flowed endlessly into the sector. At its peak, the market cap of the cryptocurrency market, a space that tracked encrypted, decentralized digital currencies, almost touched $830 billion — equivalent to that of Google or Amazon.
The reason for this is decentralized networks promise to provide better data transparency and protection. What this means is that your money is safe on a platform, your sensitive data is protected, and there’s limited room for a network to be hacked.
Despite its many benefits, the decentralized, unregulated nature of cryptocurrencies saw it swing towards high volatility over the last couple of months. Like the initial days of penny stocks, the crypto market attracted multiple rogue players that looked to make quick money, creating chaos, and volatility in the market.
With the cryptocurrency party over, the world is taking a second look at blockchain — this time with more wary eyes. Neither full centralization or decentralization was objectively correct – the path forward seems to be one of balance.
Blockchain had become the latest buzzword in Silicon Valley to attract an exuberant amount of funding based on speculation.This begs the question, is the world ready for decentralized trust solutions? If decentralization is leveraged thoughtfully, to build upon and negate the weaknesses of centralized networks, there’s much to gain.
There needs to be a balance between centralized and decentralized data. Each system has its weaknesses – but when combined thoughtfully, our team believes one can build something greater than the sum of its parts. Taking inspiration from these technologies that solves a real market need, we believe we can fundamentally re-imagine the way trust-based products are put together through digital identity platforms. This view allows companies to centralize information for efficiency and accountability, and decentralize it when it’s in the best interest of the user to not trust a third-party to control and protect their data.
Mathias is a digital identity and data privacy expert.