A New Clarion Call: Liberation Through Decentralization

DeFi is illuminating a pathway towards greater liberty.

Under the pretext of efficiency, we have been on a path of increasing centralization for the last two hundred years. There is growing unrest with the way our systems operate and it is clear that public opinion is souring towards the incumbent structure of governance. Through decentralized finance, systems are beginning to appear which demonstrate effective methodologies to reverse the maladies afflicting our world.

“Liberation through radical decentralization.” — Vitalik Buterin & Glen Weyl

On the surface, centralized systems sound efficient but for numerous reasons, their implementation has been corrupted to suit those who control them. Our governing bodies are happy to extol the virtues of centralization — its cost savings, efficiencies and supranational benefits. In reality, we can see that many centralized processes have benefited the few at the expense of the many.

Last month a shocking statistic was published which showed that the 50 wealthiest Americans are worth as much as the poorest 165 million. This incredible disparity is not because those 50 individuals are intrinsically more intelligent or work harder than the 165 million poor. The current state of affairs is the result of increased centralization and the corruption and abuse inherent in the process.

Although mainstream media is willing to publicise these statistics they remain quiet on how such inequalities have been allowed to fester in a country that calls itself “the land of the free and the home of the brave”. Anyone who has experience with poverty will tell you that a state of poverty is far from being liberating. Those 165 million poor Americans are not living in a “land of the free”.

Centralization is lauded by those who stand to gain from its implementation. It consolidates increased power into the hands of fewer and fewer people and as Lord Acton said in the 19th century, “absolute power corrupts absolutely”. Those who wield centralized power are able to twist our systems for their benefit whilst trotting out tired statements about efficiency for the masses.

The fraud which led to the Global Financial Crisis of 2008 was facilitated by the centralization of power. There are only three rating agencies for the financial markets, Standard & Poor’s, Moody’s and Fitch. These agencies provide the public with ratings from which to assess financial products. The rating agencies failed in the run-up to the 2008 crisis, leading to untold misery for millions, including 8.7 million people in the US who lost their jobs. The agencies profited from their false ratings and there is evidence to suggest that they colluded directly with the banks. If there had been 100 agencies instead of 3 then perhaps the public would have been told the truth.

Corruption and collusion are replicated across all centralized systems and the greater the centralization the greater the fraud.

Decentralized systems offer us a way out of a centralized trap and hold the keys to greater human liberty. Decentralized processes rely on community participation through technologies such as the blockchain. This process comes with a responsibility that is incumbent on the wider society. No longer can we rely on our tainted centralized systems to make decisions for us. As Ethereum’s founder Vitalik Buterin and Glen Weyl stated in their article Liberation Through Radical Decentralization:

“Only by making technical systems that offer a variety of mechanisms for checking concentrations of power and by simultaneously building social ideologies constantly on the lookout for failure modes of these mechanisms can we hope to succeed where previous attempts at decentralizing authority have failed.”

Decentralized Finance or DeFi is set to demonstrate the benefits of decentralization to a wider audience. This process may lead to the adoption of decentralized philosophy in sectors beyond finance. The rules which govern the financial world have perpetuated centralization but technologies like the blockchain are about to change this.

Traditionally, to raise money corporations had to undertake an IPO to list on a stock exchange. This expensive process precludes all but the largest companies from public funding and is subtly manipulated by centralised gatekeepers. Through DeFi companies can now sell their stock in an STO at a fraction of the cost. This opens the market to a far greater number of participants and levels the playing field. Importantly, the STO process does not require the participation of large centralized financial institutions.

In the near future, we will see the possibility for peer-to-peer lending systems. When individuals can lend to each other the need for large centralized banks will start to evaporate. This should lead to more equitable lending terms as lending is opened to more participants. A further effect will be for liquidity to flow into projects that have increased ecological and social responsibility. We have covered this in a previous article but it seems logical for communities to fund projects that bring benefits to society rather than leeching profits through exploitative practices.

Decentralization has enormous potential and could begin to right the injustices caused by hundreds of years of centralization. The process won’t be straightforward as the incumbents who profit from centralized systems will not give up their privileged positions without a fight. The beauty of decentralized systems is that they offer the possibility of participation and inclusion to a greater number of people. Therefore, it becomes the responsibility of the public to participate and engage with the decentralization process. Perhaps the clarion call of the 21st century will be: “Liberation through decentralization!”

Sonata Capital is registered in the Labuan International Business & Financial Centre, and invests in companies successfully exploiting the vast opportunities of the digital economy.

100% of the equity in our funds have been tokenised, and will be listed on digital securities exchanges in Labuan and elsewhere. The equity of Sonata Capital Ltd (LL16076) has also been tokenised, and the rights to the equity is represented by the SONATA security token issued on the Ethereum network.

Visit our website, join our Telegram chat, or contact support@sonata.capital for more information about our company and funds.