Ask Me Anything About…. Decentralization (Part I)
We need to talk about GameStop and then we need to talk about decentralization. The events of the past few days read more like a Hollywood script than a real series of events, but by all reports individual amateur traders galvanized through Reddit took on hedge funds and professional money managers — and (as the story unfolds so far) beat Wall Street at its own game.
The sheer might of the r/WallStreetBets subreddit coordinated the pumping of GameStop shares from $20 to more than $300. According to CoinTelegraph a number of centralized trading platforms have now put limits on trading the stock and the president of NASDAQ has indicated that trading could be temporarily halted. The reactionary decision by trading app, Robinhood, to put restrictions on GameStop stock purchases for retail traders (without restricting hedge funds) was met with so much outrage that Robinhood now says it will reopen GameStop trading.
Those within the crypto community, such as Mike Novogratz, CEO of digital assets management company Galaxy Digital, see the unfolding saga as evidence for the need to decentralize finance. Others, such as CNBC’s Jim Cramer, are downplaying the significance. Either way, there’s no skirting the issue: decentralization is not a sideshow. It has never been more important to understand exactly what decentralization is, how it affects us, and what it means for the existing systems.
We have always been transparent that, while WOM’s end goal is to dissolve our project, leaving behind a fully Decentralized Autonomous Organization (DAO), we’re not there yet. The technology isn’t there yet. As a society, we aren’t there yet. But for decentralization proponents such as ourselves, it’s the vision of the future we are working towards.
With that in mind WOM is launching a mini-podcast series called Ask Me Anything About… where we will be interviewing experts from across the project to talk about topics and trends from the worlds of crypto and blockchain with only one rule: there are no stupid questions. The first topic we’ve decided to tackle is decentralization and the first guest is CTO, Francis West. You can listen to the podcast here and you’ll find the full transcript below.
V: If you were going to explain decentralization to someone who’s never heard of it, what is decentralization?
F: Nowadays every technology you use is running from a central computer somewhere, so all your apps are being run by someone else and you are looking through a window at that thing.
When you store a picture it’s being stored on someone else’s server, when you write in your personal information it’s stored in someone else’s computer far away from you. All of our phones are giving away our information to someone else who manages, curates and gives you back an experience which is called, say, Facebook, or Instagram.
Decentralization leaves everything on the devices themselves. Rather than any one person holding our information the devices hold the information and they talk to each other and they share as much as we allow them to share with each other and there’s no one else involved.
This is the only way we can build safe technology. All of what we have now is obsolete due to that paradigm. Now that may take another 5, 10, 15 or 20 years for people to recognize, but it is the truth of it. When things are held on your device or computer then you are in charge, you have the power, and you are the source. If we’re talking about returning power to the people, which is what decentralization is all about, then the only way to return the power is to make sure it never left.
It’s given to the people in terms of choice, their device is the one doing things, and their experience is their own experience. Nobody can interfere with it.
V: OK, I can understand why people would want decentralization, of course, people want to have control of their own data. But from the other perspective, from the central organizations that have been benefitting from the system, why would they want things to change. Surely they would resist?
F: If you look at Bitcoin, for example, the banks have made it very hard for people to use it, or any cryptos at first. It took a while before people broke through that. There were companies having to go through years of regulatory hurdles and hoops just to be able to be allowed to use them. And I don’t expect any centralized operation to ever want their decentralized equivalent to exist because when it does it’s going to be cheaper, it’s going to be better, and people are going to prefer it, given time.
Like any other phase in our history, there was a time when bricks and mortar buildings were ruling everything, where nobody thought you’d ever shop online and where the internet was some up-and-coming punk that no one really took seriously. These things change and they change quickly, so the existing businesses are free to adapt. That said, the thing about decentralization is it totally takes away the ability for an intermediary to take a cut all the time, of everything. That’s called rent and you have big companies, say, for example, taxi companies, taking large percentages of every operation within their market. But if you look at technology it’s basically just running to some degree. Yes, there are engineers required to keep it going, but these are very small costs in the larger picture.
The reality is that they are taking rent, they built the technology so they are going to take money out of the marketplace continually. If you look at the equivalent decentralized taxi service, which is technologically very possible, then it exists at a higher level of security than we have now, as well as a higher level of safety in terms of who you are riding with and who’s riding with you. All of that reputationational and safety information can be stored in a decentralized system which is so much better because it’s completely pure.
If you imagine that existing taxi service will suddenly see new competition coming from nowhere, running everywhere, and will probably be significantly cheaper for everyone. The drivers will get the full amount because whatever the passengers pay will go to the drivers and there’s no one else involved. Perhaps there are a few fees for the network. How are they going to compete with that? They aren’t. This is going to be a complete change in all our technologies in the next 5–20 years. We don’t know how or when but it’s already begun. The first question always is, “how will the existing systems cope with it?” and the answer is: most of them won’t.
V: So all the middlemen who are around today are essentially going to be out of a job. Or, as you say, maybe there is scope to adapt?
F: You see the same thing with real estate agents, the online market killed a lot of that, but it didn’t kill everything so there’s always a place for people. In fact in a decentralized world it’s not all about technology, it’s actually all about people, finding out what people want and a lot of the time people want personal connections. So you can have technologies that get you involved with your immediate and local communities, those are hopefully going to start appearing more. There will be plenty of new jobs for people to do.
The decentralized world is hyper-efficient. It’s all predicated on enormous amounts of synergy as people find each other, more appropriately, with less businesses involved. For instance, if you are looking for a babysitter and the service shows you only the ones that it wants to show you, because those ones have subscribed to the premium service — you will miss a lot of options. That doesn’t happen with decentralized tech. So a lot of the middlemen will vanish, and in their place we’ll see services that have a good price, that are competing in a free marketplace, and hopefully, as usual, the better services will rise to the top, providing that no one is interfering with the technology to further their own goals. That’s what we are looking to see. Does that make sense?
V: That makes sense and it sounds great to be honest. But I guess the question is that’s what we want, that’s the vision of where we want to get to, but where are we now in reality vs. getting to that point?
F: Truth be told we are very much at the beginning. I hope we can start to hear about these concepts more. There’s a handful of people who know this stuff and are ready for this stuff, most of the rest of us are distracted, and in fact it’s no one else’s job to run your life but your own. No one can decide what’s good or bad for you better than you can and we want to see people in that position. That does require that they are healthy, safe, financially secure.
Hopefully we’ll see the population of our planet become more financially secure as we give them more options to become financially secure. Right now there are limitations everywhere. You want to start this? Well you need a bunch of paperwork. You want to do this? You need even more paperwork. There are all sorts of hurdles limiting what people can and can’t do, but if you want to become a driver for $5 an hour, then that’s fine, that’s easy access. But if you want something more than that then there are a lot of hurdles in society. You can’t just start a business anymore, it’s tonnes and tonnes of paperwork and loans from banks are getting more difficult.
How long it takes for people to understand that there is actually a solution, and how long that takes for it to settle, I can’t say. Because the decentralized world is upside down in comparison to the world we live in now. Right now, everything comes from the top down, like in a pyramid, and we’re all at the bottom with our little pots saying, “please sir can I have some more”. In a decentralized world the center of power is the individual, so everyone is the top of their own pyramid. As you go further up in power, you actually have less power, you’re more an adviser and you are there because of merit. When somebody follows a smart person on YouTube, it’s because they value the input. You can see the decentralized world here, in subscriptions and followings and when you look at people and you think, “oh I like this, this provides value for me, so I’m going to follow it”. That’s how decentralization works.
With centralization you have this option, take it or leave it, and we saw those options decrease over the last twenty years. Everyone had more options in the 80s and 90s and now there’s less and less of what you can do and what’s available to you. It’s been contracting.
Now we see the beginning of the world of decentralization with of course Bitcoin and Ethereum and suddenly people are like, “oh wait, you mean I can send my money around?” and yes, you can. When you start actually using cryptos in your day-to-day life, it’s very hard for you to ever go back to the banking system because it’s so old-school, it’s so old-fashioned. Why go into a physical branch and sign things when with crypto you can press a button in the middle of the night in your pyjamas? The centralized system controls, whereas the decentralized system is about the individual. When an individual wants to control something then they ask for it and it’s controlled for them by their own mechanisms and their own devices.
V: You talk there about people using crypto in their everyday lives. Are you saying there are people now who really use crypto in their everyday lives and they are not using banking?
F: Yes, I’m one of them and I have been for a long time, and there are many people who do that. Yes, I have to use banks, I have to use credit cards, because in a lot of places you can’t just pay with crypto. There are problems with it, for instance, this morning I paid for my 2 Euro coffee and ended up transferring 10 Euros because the fee was 3 Euros, so I transferred 10 Euros so that I would have a few coffees in my future to avoid the fee.
It’s still very early days so it’s not possible to use crypto really regularly unless you are involved in the scene and have some knowledge about all of the things that you can use it for.
But for everybody, there’s no question, you have to learn what it is, you need to look into it. I find it so difficult when I meet people who say, “it’s a scam, it’s a scam”, I think, well you don’t know how it works. You don’t know what it is or what the change is.
There are three major selling points for it and the first is trust. You want to know how to trust it, and perhaps you yourself can’t, but if you are a programmer then you can look at the source code yourself and say, “OK that actually does what it says it does”, and if you are not a programmer then you can see that there’s a huge community of millions of people who are incredibly aggressive with each other whenever anything goes wrong. Very very passionate, professional hobbyist experts all over the world can guarantee the safety of that project. So that’s one thing, it’s very very safe technologically.
It does what it says it does, in other words what Bitcoin really is, is a conversation between devices. Once you have a Bitcoin, it’s yours, and no one in the world other than you and your key can move it or do anything with it. That’s very nice, that’s sovereignty, and you have many options with what you can do with it. You can send it here, you can use it for other things, you can hold on to it, and no one can interfere with that, so that’s also an amazing thing.
The third part is that, in a sense, it is an entirely new world and it’s based on a very old world. In the old world we landed on a planet and we had to survive — that was decentralization in the beginning. We started to work in communities as tribes and things like that, when we would protect each other in groups, and that’s what decentralization is all about. It starts from the individual and then works into communities. But now with modern decentralization, with what we can do now, we can have a village running its own systems, its own power systems, its own electricity, unbelievable amounts of things, having its own currency for the region — if it wants it. The village can initiate trade, trade with neighbors, they can do anything. Not only that, this little contained, self-autonomous village is actually hyper-connected to all the villages around it, and most probably some across the world. So imagine villages hyper-connected at a planetary scale, rather than everyone attached to one thing which can fail, which is what we see today. Rather than being attached all the time, you are connected on a global scale.
That’s the very big difference and that’s what Bitcoin, for instance, and Ethereum, and all the projects coming are just beginning. Now we need to see the businesses, and the things that help organize businesses exist, and that’s going to start happening soon. It’s a slow, but steady progress in this direction, that we’ll start to see happening now.
V: What can businesses do right now to understand decentralization better?
F: I think it’s probably better that we look at the individual and then the individuals form their businesses. So I prefer to say what can the individual do at this point and the individual can go and look, watch a couple of YouTube videos, go and learn about it in some form or another, but most of all, pick up your phone, install a trust wallet or go on an exchange, buy yourself 20 Euros of one of these things and just hold on to it and learn how it works, maybe just play with it a bit. That’s the best thing to do right now.
As for businesses they can start implementing cryptocurrencies and blockchains where appropriate and we see that a lot now. There are simple ideas for what can be done, but we’re not quite there yet.
Businesses just need to pay attention, keep an eye on it and see what options exist for them. But I think that right now things are probably moving too fast for most businesses to be able to find out where they belong yet. Most of the business-related activity is happening through people already in the industry of crypto who want to make projects and it’s kind of a little bit experimental. And that’s expected, that’s how it looks at the beginning of a frontier rush, which is where we are at this moment in history.
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