The Value of Decentralization

The case for why users should care about decentralized networks

For most of recent history, centralization has been the protocol that has run the world. Whether that be the federal government or large corporations, the general consensus has always been to entrust them with authority in the hope that they will make the best decision for their subjects or customers. While it isn’t necessarily ideal, it does make things a little bit more efficient.

For example, the federal government today doesn’t need to take a vote on every policy decision they make. Instead, we host a recurring election cycle where the ones who will be governed can entrust a chosen politician to make decisions for them. Similarly, sending money to vendors for a product or service doesn’t require you to verify the vendor’s identity each time. Right now, we use centralized financial intermediaries, such as banks, to conduct and record the verification ahead of time.

But with the introduction of blockchain technology, we may be entering a world where we no longer need centralized authorities. Even if blockchain doesn’t completely replace them, it may be able to take over many of the functionalities that these centralized institutions have. The result is a world with more checks and balances on power and more peer-to-peer networks.

An Example of a Peer-to-Peer Network (Source: BlockTac)

So, if one of the main value propositions of blockchain is this concept of decentralization, it ultimately begs the question: Should users care?

The answer is yes. Here’s why decentralization should matter to you

1. Lower intermediary costs: If decentralized networks are truly peer-to-peer, then an intermediary is no longer required to oversee transactions or communications across the network. This should ultimately result in lower fees for the user due to the lack of any hidden commissions.

2. Censorship resistance: Decentralized networks are censorship-resistant because there is no centralized authority. This is extremely valuable to users of social media platforms where free speech is of utmost importance. It is even more valuable to citizens of third-world countries that are under authoritarian regimes.

3. Data protection and security: Decentralized networks provide the advantage of not having to exchange user data for a product or service. Data is quickly becoming the most valuable asset in the world, and being able to protect this is, or at least should be, important to users.

4. Platform ownership: Decentralization means users can become partial owners of the network on which they interact. These networks can even extend voting rights, through tokens or otherwise, to their users so that the group can collectively make decisions about the future of the platform. This is where DAOs, or Decentralized Autonomous Organizations, can get really interesting.