The blockchain community would have us believe that the world is either centralized or decentralized with the former being the problem to be solved by the latter.
We have seen a proliferation blockchain platforms (quantity not quality). Yet, we have not seen a corresponding adoption or proliferation of use cases. We have simply not seen any credible or widespread use cases that have demonstrated a benefit or value beyond media hype. A critical analysis of the value gained from “decentralized” platforms will prove that a positive TCO is rather elusive.
This article explores why decentralization has failed to provide value. We will describe that centralization is not the problem. Rather the problem is with the basis of trust in transactional systems.
The decentralization community did correctly recognize that control of transactional data is balanced in favor of the controlling institution. Satoshi Nakamoto’s first line of the Bitcoin whitepaper states, “A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution.”
Therefore, the centralized institution became the problem to be solved. Decentralization requires the displacement of the centralized authority in favor of a purely peer-to-peer system. Unfortunately, technology systems do not emerge and evolve in an organic sense. Whether Bitcoin, Ethereum or any other public blockchain platform, there are folks that have control. There are folks that develop the blockchain software and there are miners to validate transactions. Therefore, control has simply shifted from a well defined structure to an opaque model. And perhaps, “opaque” is too kind of a tag for the leadership and operational model of decentralized blockchain platforms. A more accurate description of decentralized platforms might include adjectives such as stealth or covert.
And that represents the first problem with decentralization; a purely decentralized technology platform is not possible. Metaphors, mantras and catchphrases to the contrary do not suffice as solid architectural practices.
So, not only has the blockchain community been solving the wrong problem, but the architectural model in support of decentralization suffers far too many bad design concepts such as mining, block design, Byzantine Fault Tolerance, etc.
As mentioned, the problem is with trust in transactional systems. Instead of focusing on decentralizing the institution, the blockchain community would have benefited from better studying the underlying problems related to trust.
The Internet has evolved such that trust is grounded to the hosting institution. The user has no authoritative control of his or her data. The user has no authoritative portability of data. Even businesses who transact with each other lack this basic capability.
Proof of the extent of this problem is with bank accounts. Ask this question of yourself, if I move to another bank can I also move my transaction history in a way such that the receiving bank will trust the data? The same applies to eCommerce, insurance, Internet search history, etc. The user might be able to export and provide a copy of the data to a receiving institution but that data is not authoritative.
“Authoritative” as a characteristic of data defines the nature of trust in that data. The Internet evolved to have a trust model that is institution-centric. Examples of institutions include search engines, social media providers, insurance companies, banks, eCommerce providers, and basically any company that collects, shares or transacts data from the user or on behalf of the user.
Therefore, the institution is the authority over trust in any data transaction.
And that takes us to the second problem with decentralization. If we can agree that the problem is that users, including companies, lack the ability to control and retain authoritative portability of their data then it does not matter whether a provider of online services is centralized or decentralized. It simply does not matter if the problem to solve is authoritative data portability.
If one can freely and authoritatively select a different provider of online services to service their data and one can freely select a different provider of underlying transactional services then the resultant architectural model should be based on requirements based on the needs of the user.
The solution is not with conventional architectural models that are institution-centric nor is the solution with decentralized blockchain. The solution is with a model that establishes the basis of trust with the user at the transactional level.
We hope the points we make encourage you to question the status quo.