Web3, blockchain, and the pitfalls of decentralization
If you live in and participate in the modern world you may have heard the words blockchain, Web3, or decentralization. You may have invested or at least know someone who’s invested in crypto or another blockchain product. So you might be wondering what these things mean individually and how they connect.
Blockchain
Blockchain is digital data stored in computers. Blockchain technology is what makes crypto decentralized and secure. Blockchain’s revolutionary technology encrypts and stores information in computer nodes automatically, without the need for third-party interference, making transaction records unalterable and accessible to, and controlled by everyone.
Web3
The decentralized web or Web3 is a decentralized future iteration of the centralized Web2 we currently use. The current Web2 or the internet as we know it is controlled by big corporations, and apps and content can be removed without public control or input. Amazon owns the biggest web hosting service, and Google, the multibillion-dollar corporation, is the internet as far as any layman is concerned. Web3 deviates from this by making use of distributed ledger technology to democratize the internet and cede control from centralized governments.
Decentralization
The term decentralization is a concept in blockchain technology that refers to the method of data storage and control. Data on the blockchain is stored in multiple computer nodes, creating multiple backup copies. What this means is that, unlike other digital data storage methods, with blockchain technology, there are multiple copies of data created on multiple computers, so if one goes down, there is always a backup. This also means that data modifications are recorded over multiple sources so no one person can fraudulently alter information. When we speak of decentralization, we are speaking of these qualities of fidelity and control.
The problems of decentralization
The current tech revolution is supposed to lead to a transfer of power and control from centralized governments and corporate bodies to everyday people. Blockchain technology is heralded as a welcome disruption to several industries from finance to medicine and everything between. But even though it offers some perks like lower transaction fees and data security, blockchain technology and its revolutionary quality of decentralization has failed to live up to its promises. Below are some problems with distributed ledger technologies:
- Decentralized decision-making:
Decentralized platforms are run by Decentralized Autonomous Organizations (DAO). Typical organizations have boards and managers but DAOs are the rule-making committee on decentralized platforms. There are 3 problems with this method of decision-making;
- A lack of qualified managers: These boards are not made up of experts so their decisions might be shortsighted. The average person is not qualified to make judgments on issues related to governance or finance.
- Time-consuming: Decision-making that requires broad public voting can often be slow. It slows down operations and makes emergency decisions impossible.
- Lack of coordination for decision making: Because DAOs try to diversify leadership, this also creates a problem of diversified opinions and a lack of unity leads to longer policy-making also
2. Security
Blockchain’s main appeal is the immutable storage of data but even with this ability security is still a problem. Decentralization poses a security risk because blockchain platforms are being built by experts in one field who are amateurs in others and cater to and give control over to other amateurs, this poses a serious security risk. Many platforms have started and shuttered as quickly from hacking. With pump-and-dump scams plaguing the crypto world and few platforms using blockchain technology available the accessibility and appeal of blockchain products like crypto are still limited.
People trust authority and qualified managers. In traditional stock investing, amateurs turn to brokers who understand and sometimes influence the market. With decentralized tech, you’re responsible for your data and ultimately its security. Individuals who are not invested in tech might be hesitant to gamble with blockchain technology and its promises of decentralization.
3. A lack of belief:
This ties back to a lack of qualified managers mentioned above and the trust and confidence they instill in consumers. If money is already transferred digitally, one might ask why we need crypto.
There are 6 key traits that make fiat currency or any other currency accepted as a legal tender and they are; scarcity, durability, portability, divisibility, uniformity, and finally, acceptability. For fiat currency to exist and be used as widely as is, requires people worldwide to collectively agree to accept it and believe in its authenticity. This main attribute of acceptability is lacking with blockchain technology and why the constant proliferation of cryptocurrencies without regulations is crypto’s downfall.
This is the catch-22 of decentralization. For people to accept blockchain technology, they have to trust it and for trust and availability to happen, people are going to have to already use blockchain products in the first place. Another catch-22 here is the fact that in order to build trust and adaptability, there are going to have to be qualified managers and corporate or governmental regulations. This problem of accessibility and adoption also plagues other blockchain products like the metaverse.
4. The same powers in charge:
The big promise of decentralization is ceding control from government and big corporations. Crypto and other tech aficionados tend to think of themselves as anti-establishment rebels, disrupting several industries and shifting control from big corporate bodies to the little man, but here again, blockchain technology fails to deliver.
Big decentralized platforms are often built and controlled by big companies and often take into account government investment. We’ve gone from corporate billionaires to tech billionaires who have the same goals of securing their company interests. These tech overloads are promising a revolution while creating platforms like the metaverse, that are only accessible to certain individuals who can afford it. Investments like land buying in the metaverse and crypto acquisition are still majorly only accessible and profitable for the already rich and exclusive class. Tech billionaires and tech companies are currently already in power and cahoots with centralized governments and are fuelling investment in fraudulent and unverified platforms that governments are cautious about. This curious phenomenon creates a unique problem for blockchain where its revolution is already here but it still has the same problems and individuals as traditional centralized platforms and products.
In the 21st century and its big internet revolution, we’ve gone from work culture to consumer culture and now a creator culture. If one culture is responsible for another subculture then the question is; where is the current internet creator culture leading us and what can we do with it? The major pitfall of Web3 and decentralization as a whole is a lack of diversified vision and imagination. Besides ceding control from corporations and spreading it among individual computer nodes, distributed ledger technology hasn’t fully lived up to any real promise that centralized platforms do not already provide. The question now is what other realistic possibilities can blockchain lead us to?
