Decentralization: A New Way of Doing Business
At DropChain, we aim to bring transparency and traceability into the food supply chain. In previous articles, we discussed about our rationale of dual-token economics, and also upcoming product updates to realign our existing business with DropChain’s new initiatives. This time, we would like to share our thoughts behind the decentralization of our business.
Many new projects are using blockchain technology (often in the form of private distributed ledgers) to extend, improve and make cost savings in their traditional centralized business model. However, with blockchain, besides the technology itself (immutable, traceable, etc…), it also provides a unique opportunity to change legacy business models into a new form due to its distributed trust nature, namely a decentralized business model. At DropChain, we believe decentralization helps align users’ interests with platform interests because updates to the platform will be initiated and agreed upon with key stakeholders in the ecosystem, instead of just the company behind the platform making all the decisions. To further dwell on this, we need to look deeper on the meaning of decentralization.
The term “decentralization” is frequently used within crypto-economic discussion, but often not well-defined. Here are two very simple graphs to describe the difference:
Basically, Centralized means that there is one single entity has control over all the processing, while Decentralized does not. Sometimes the conversation dwells down to a 0 or 1 discussion: either a business is 100% fully decentralized or remains 100% fully centralized. Just like dual-token economics, our belief is that a combination of advantages from both sides will ultimately create best benefits for both the users and the business. Software decentralization comes in different forms:
1. Decentralization of System: Is there a single point of failure for the system, or is the risk fully distributed across the network?
2. Decentralization of Control: Is there one single entity controlling the entire system, or are those controls distributed across different entities?
3. Decentralization of Data Structure (governance, experience, interface): Is there a common data structure law with consistent interface experience across the network, or will there be multiple iterations catering to different segments with different networks? Sort of like one single Federal Law vs multiple State Laws.
Traditional corporations are centralized in all three aspects. Conversely, BitTorrent is decentralized in all three. For DropChain, we want to provide accessible logistics solutions to SMBs so they can save on the upfront infrastructure investment costs but also to create a unique business model in which they can willingly participate together. We feel this is best accomplished through a mixed model:
1. DropChain will decentralize our system requirements, as blockchain technology enables diversification of system failure risk through distributed data storage. In this a way, the DropChain Network can have both fault tolerance and attack resistance.
2. DropChain will semi-decentralize our platform control. In Phase 1 and 2, Brand owners and later Investors will be our sole focus group to share the system control together, as they have vested interests in the success of the platform. In later Phases, we will consider adding more entrants to the ecosystem governance.
Each stakeholder within the ecosystem will be free to control their own data as they deem fit. To deter bad players negatively impacting the stability and integrity of the platform, additional controls will be built in place to strengthen collusion resistance.
3. DropChain will centralize our data structure, governance model and interface experiences. A single, distributed platform will be developed. DropChain as the initial custodians of the ecosystem will lay down its foundations, such as the logic behind each smart contract, the rules of engagement for each stakeholder, application protocols, and interfaces. This creates strong assurance that the ecosystem will be stable, enabling developers and 3rd party hardware manufacturers to integrate their technology into DropChain with confidence and certainty.
Conversely, what about top-tier Brands who just want their own blockchain solution? A centralized private blockchain ledger solution would better suit their needs. This would assume they prioritize data security over data efficiency and data ownership. Not all businesses are suited for a decentralized business model, especially large, well-established, traditional companies.
This is only the beginning of creating a new semi-decentralized business model. As regulation, technology and user bases evolve, we expect DropChain’s business will evolve along with them as well. We welcome our community to chip in and provide support and feedback on our work through our various community channels below!
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