Does Crypto Always Mean Decentralization?

Published at: Oct. 2, 2019

Cryptocurrencies are based on decentralized technologies, but there is a big difference in terms of what they are, how they are used, and what it means for the projects — and now, governments — that are engaging in these technologies.

With recent events such as the Libra announcement, the emergence of a proposed Chinese national digital currency, and other sovereign state crypto announcements, there is a very real possibility of a large segment of the population being led astray.

Decentralization

If you look at cryptocurrency, it is a digital currency or asset that operates on the back of a decentralized technology called blockchain that is capable of being integrated into many different platforms in many different ways.

Decentralization, on the other hand, is more of a philosophy. It’s as much a philosophy as it is a form of technology or an approach to technology development. Now seems like a good time to start putting some clarification around these elements for the new wave that will be adopting products and services based on these technologies, and promoting a dialogue around the difference between the recent decentralized movement we have seen, and the engagement in cryptocurrencies we are now starting to see with major platforms such as Line and Facebook. With the advent of things like social credit scores emerging, where platforms promise not to read a user’s online chats to determine their score, this clarity is becoming even more important.

Decentralization is a belief and approach that there should not be a single centralized point of control, failure or disproportionate influence in a given scenario, and its ultimate objective is achieving increased democracy, security, efficiency and decreased exploitation.

The movement we have seen boom the last few years since the popularization of blockchain has, in large part, been based on this philosophy of removing the centralized broker or facilitator in a scenario, removing inefficiencies, and opening up new possibilities, including delivery of a ‘truly’ decentralized network or service, whatever it may be.

The decentralized movement around consumer software in particular has largely been oriented around putting users back in the driver’s seat regarding their data, privacy, communications and financial transactions, looking to usher in a web 3.0 that increases the benefit to users of technology as opposed to focusing value primarily to the service providers.

The centralized model

As far as software goes, decentralization is nothing new. In fact, it was first commercialized two decades ago by well-known projects such as Napster and Limewire, which, those of you born in the early nineties or earlier will remember well.

These services were based on peer-to-peer (P2P) technology that enabled peers to interact directly, device-to-device over the internet. As these technologies and more like them came to market, a number of factors ranging from scalability, bandwidth, hardware capability, user requirements, legal issues, vested interests and more pushed toward increased adoption of the centralized model we now refer to as “the cloud.”

In this model, a centralized third party would act as the middleman and facilitator to enable connection, reliability of services, storage and a number of other bells and whistles. This model is now used by almost all online services we use today.

One such company that emerged out of this centralized movement was Facebook (along with a few other well-known names) that perfected the model of being the middleman service, collecting data and extracting as much value as possible out of user interactions, treating users not as customers, but as the product whose data they would harvest and sell on to advertisers and others.

A statement that stuck with me from theorist Douglas Rushkoff — and I’m paraphrasing here — was that the purpose of human interaction is to create an exchange of value directly between one another, whereas the purpose of social media is to monetise that relationship. Out of these developments and this centralized architecture model, we can’t deny that we now have amazing capabilities as users of these platforms, but it’s turned out that this came at a pretty significant cost in terms of our privacy and data control, as the public has increasingly been made aware.

Can a leopard change its spots?

What we are now looking at is a project and consortium of companies (those announced so far) looking to enter the decentralized domain via the Libra project that are masters of public relations, generally do not align with the values of decentralization, and have the capability to manipulate public opinion very well.

That is not to say that Libra will not create immense value (I personally believe it will), but that it is important to be clear on the fact that the new token is being created from a very different philosophy than many other developments in this space that are working toward building a web 3.0 to put the interests of the users as the focal point.

With misinformation now at the point of weaponization, when we are talking about the emergence of a turning point in the global financial system and targeting hundreds of millions of unbanked people around the world, it’s no less than significant to ensure that users adopting these technologies are aware of what they are voting for and buying into.

The target market for the Libra project is generally the mainstream, not techies. This is an audience which is relatively easy to sway in opinion or cast a veil over as we’ve seen in relation to data privacy on communication platforms in particular. It’s taken a long time for people to cotton on to what’s actually happening there, so one can only imagine the wave of confusion this latest movement will introduce.

Full credit where it is due: What Facebook has achieved is truly remarkable, it has connected the planet. But my question is: Is it possible for a leopard to change its spots? Should we be jumping into Libra without a paddle when the company driving this project seems to be fundamentally incompatible with the concept of decentralization? Is a pivot of values at such a magnitude even possible for a huge organisation like Facebook? Is that even their underlying intention?

As they say, the body follows the head, so unless Mark Zuckerberg has gone on an Ayahuasca-fueled yoga retreat and completely transformed his personal values, I’m not sure if we can expect a shift in morals occurring at a core level for the organisation.

The state of the stack

A significant amount of development and resources have gone into trying to pull off completely decentralized software offerings on the back of this blockchain boom, and something that has clearly come out of that is the state of blockchain tech in particular and its ability to scale.

From the perspective of delivering a solution to a market serving a couple of billion people, there is definitely truth to what the Libra whitepaper is saying, in that blockchain technology isn’t quite ready yet. In terms of rolling out a commercially viable solution to the masses, it is going to inevitably have to involve a hybrid centralized/decentralized approach.

The risk there, however, is that once the first version is rolled out and gains adoption, is there even going to be a drive to deliver a fully permissionless system? Also, what is the incentive for a group of companies that benefit from control and data oversight to voluntarily reduce their visibility and control across their network?

For projects that have built solutions from the ground up and are looking to grow adoption and scale, it can be a much easier job, or much more possible at least for them to deliver a truly distributed solution to market that will work and will scale with their platforms as they grow, as opposed to the challenge of retrofitting to a massive, pre-existing global user base.

The Libra project will need to develop a hybrid model to roll out to the share volume they are targeting, one just hopes that there will be an element of transparency as they move through each stage.

The impact on industry

One cannot deny that a project of Libra’s scale entering this space is going to significantly benefit the industry as a whole. It is going to push development, regulation clarity and societal acceptance of digital currencies, driving progress in all areas and facets.

The community as a whole is going to benefit from this, we just need to make sure that there is a known distinction between the projects, the technology and what they are being used for, so that as the mainstream weighs in, they know what they are supporting. Just because a platform integrates crypto, doesn’t mean it’s decentralized.

We need to ensure that we don’t fall into the position where we get halfway to decentralization before fundamental compromises are made, still considering it a done job while major players that don’t necessarily align with the philosophy of decentralization end up being the ones who are championed to the mainstream as the pioneers for this technology, what it can do, and what it represents as we move into the era of web 3.0. Hopefully Libra doesn’t become, as Joe Lubin put it, “a centralized wolf in a decentralized sheep’s clothing.”

The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Dorian Johannink is the co-founder and business director of communications platform Sylo. Johannink draws on extensive digital and social communication expertise with specific strengths in digital strategy and implementation. He holds double-major degree from The University of Auckland in Management and International Business. Dorian is responsible for driving business and relationship development for Sylo and spreads his time between New Zealand, the USA and Asia.