The True Enemy of Decentralization
Blockchain is enabling our next revolution. But to know what we must fight to create, we must first understand what we fight against.
Blockchain is a truly revolutionary technology. Its core innovation is decentralization of trust — disrupting intermediaries, distributing power, reducing over-reliance on authority.
But decentralization itself isn’t new. It was the way of the world once, back when the influence of centralized institutions was limited — back when we could still enforce limits.
Decentralization, as a word, only came into being as an opposite. It is a retort to “centralization” in the same way “cord-cutting” opposes the cord. It is the peak to centralization’s valley, the other side of the waveform.
“Centralization” became a common term in the 1800s, mostly to describe the tendencies of governments or business to increasingly restrict decision-making powers. “Decentralization” was known to be its counterpart, often describing a failed attempt to resist centralization of a system. Alexis de Toqueville wrote in the mid-19th century that the French Revolution was, “in the beginning, invariably, a push towards decentralization… in the end, [it was] an extension of centralization.”
The difficulty in re-decentralizing systems — such as France — is easily explained by human nature. Vivien Schmidt writes:
“[there was a] distrust of the local population by those in power who had gained power as a result of local upheaval… but feared losing it in consequence of such upheaval… It was only in periods of governmental crisis that legislators, uncertain of their own tenure in office, tended to respond positively to the demands of the populace… but this lasted only as long as power remained uncertain.”
As Schmidt describes it, for a century after the French Revolution, centralization of the French government waxed and waned, with increased decentralization “in times of crisis followed by long periods of recentralization in times of relative stability.”
This oscillation between centralized and decentralized systems is, of course, inevitable. They are not true opposites, just directions on a spectrum. We only see these types of systems as two distinct ideas, directly opposed, because of how centralized our current systems are.
In more centralized systems — like the ones we have all come to inhabit — concepts are reduced to black and white, good and bad, red team and blue. The highs are ever higher, the lows even lower, until we lose sight of the larger cycles completely. But reality itself is full of gray areas and uncertainty, from the societal level down to the quantum.
This oscillating pattern at social scale is not exclusive to France. It has been reflected throughout history, from ancient China to the present day, both in government and in business. Leaders who attain their power in crisis find it inconvenient to relinquish control even as catastrophe looms. There is an obvious human fallacy in valuing centralized over decentralized systems absolutely. Densely concentrating power creates a single point of failure — “unless I have the power, as I cannot fail.”
Thus the centralization of systems is carried well past the point of utility or prudence. Examples of centralization’s horrific failures are numerous — banking crises, fascist governments, genocides, monarchal beheadings.
But to be clear, centralization itself is not evil — it cannot be. It does not exist in opposition to anything. It’s just a concept, a point on a line, always in relation to something else. Over-centralization is the enemy — cycles of reconcentrating power amongst fewer individuals until systems collapse under their own weight.
The blame in these circumstances could be placed on leaders and incumbents who grab hold so tightly of the system they control that it chokes to death. But these are not always personal failures. Systems designed to allow for this type of over-concentration and abuse of power — or systems that can be modified to allow it — are fundamentally broken. No arrangement of individual actors within such systems can save them without first deconstructing them.
But by similar logic, we see that under-centralization is the enemy as well. Systems that are completely decentralized are challenged in making decisions. Individuals may not hold enough stake in outcomes. Responsibilities may be ill-defined or non-existent. Truth becomes scarce, and growth ceases. At a societal level, chaos is the norm, expertise languishes, and the Dark Ages loom.
Again, no arrangement of individual actors can save such systems. These types of situations can be briefly created unintentionally by war or economic crises, the failure of traditional institutions en masse, until “order is restored” by more centralized, trusted actors. This resolution a good thing.
While it is clear that there must be some appropriate level of order, the failures of systems are not only due to “too much” or “too little” centralization. Failure can also occur when one system centralizes more rapidly than another interrelated system, or when two systems fail to properly interoperate.
Kings and dictators have been replaced, at least in much of the West, by representative democracies with term limits. The aim of decentralizing power and allowing for local governance is to construct more robust political systems, less susceptible to corruption and more adaptable to local circumstances. But when economic systems, social norms, and values reinforced centralization, the robustness of decentralized political systems broke down. So the American system was destroyed by the influence of money in politics — “pay to play” — and a culture that prioritized profit over prudence. It was further weakened by gerrymandering and voter suppression.
In contrast to the self-sustaining political system designed in the Constitution, our economic system is clearly designed to naturally reach levels of over-centralization. Businesses converge to monopolies through economies of scale. Wealthy individuals concentrate power by restricting access to capital. We know this. Our political system was meant to mitigate this through corporate taxation, antitrust, and control of interest rates. But as we see, this relationship was eventually broken — and now, it is exploited systematically. This broken relationship between money and politics has caused other systems to self-corrupt through over-centralization.
Enter the Internet, a true technological innovation. It was supposed to lead a revolution, a new weapon to wield against over-centralization. Its early days were considered the “Wild West.” Slowly, as the capitalist imperative was juxtaposed on the nascent Internet, the shift was validated and glorified by society, by venture capital, and eventually by Aaron Sorkin. The growth and “professionalization” of the Internet has led to world-changing progress and created enormous value, but now what was revolutionary has become routine. Most of us interact with the Internet at levels of abstraction like the Google search bar or Facebook feed. Value is continually extracted from the individual to the institution. As time passed, like our political system, the Internet became over-centralized and broken.
Somehow now, our modern world expresses some of the worst traits of both over-centralized and over-decentralized systems. Our government has concentrated political power within groups who have no apparent interest in governing. Platforms like Facebook and Twitter exert tremendous control over the content we view (and thus the content we produce), while their failing internal controls cause the quality and reliability of the content to deteriorate rapidly — all while revenue rises. Huge corporations and political actors are crushing innovation (see Chris Dixon’s excellent recent piece) — and if we let them, they’ll crush the newest innovations of decentralization.
Blockchain brings our systems hope. It is a revolutionary technology for decentralization, just as vertical integration and religion were revolutionary tools for centralization. It is the weapon we now must wield against over-centralization.
By marrying decentralizing technology with self-sustaining incentive structures, we have found a way to break the cycle. We have found methods of self-governance that are resistant to corruption or human fallacy. We have the power to wrest control from centralized institutions.
But we must also wield all our weapons against under-centralization. The blockchain and crypto space is plagued by malicious actors, liars, in-fighters, profiteers, rent-seekers in technologists’ clothing. They seek to destroy the new decentralization revolution, not by centralizing or over-regulation, but by dividing us even further against ourselves.
The question is not — should crypto become more centralized? The question is — who will we allow to centralize it? If we wait for traditional regulators, we will get traditional results. The innovations of blockchain will be tapped, drained, and discarded by our current centralized institutions.
We must embrace self-organization and self-regulation. To do this properly, we must protect the truth at all costs. We must demand openness from organizations in our space and hold bad actors accountable. We must fund those who maintain the flow of data and information. We must reject the idea of centralization as enemy, and join together to support our ideals.
Decentralization should not be our end goal. Sustainability of our systems should be. For this, there are allies everywhere.
The Great Reconfiguration is here. Our greatest minds are escaping traditional, over-centralized organizations and dedicating themselves to the pursuit of critical projects in blockchain. That they can do so without fear of starvation is not a miracle, but by design. Blockchain has freed them.
With this freedom comes new responsibility. Now we must embrace it.