Decentraleyezd
Bitcoin changed the paradigm of value
The common belief of value and trust has been flipped upside down since the emergence of blockchain technology, brought about by Bitcoin in 2008 on the heels of the financial crisis. Bitcoin’s revolutionary new technology of blockchain ledger, first of its kind created a decentralized method of securing transactions, powered peer to peer through individual nodes who are not controlled by a single entity. Removing for the first time, the needed trust of a middle man to help broker transactions. The cracks in the system were finally exposed and the curtain was pulled back revealing the the true dangers of a centrally ran authority system. This cataclysmic event showed us how dangerous it can be when a single point of failure can bring down an entire economic system. Such as a Wall Street bank that needs a massive bailout, dubbed too big to fail, sending the economy into a tailwind. Allowing a central authority to make the decisions that effects everyone.
Trust in institutions, political leaders, and central bankers is dwindling more and more each year and rightly so. After all the controversies over the years we have witnessed from major companies to world leaders alike. It is clear that human nature is largely unavoidable and greed, power, and mistakes can and will occur when a small group of people are entrusted to make the decisions for the masses. It’s no surprise people are uncomfortable putting sensitive data, money, or personal property under the control of a central authority.
Centralized, decentralized, distributed
Bitcoin’s blockchain protocol, is a decentralized system for exchanging digital value, but it’s also an example of distributed ledger technology. The blockchain cannot be altered by any one entity (decentralized). But It also runs as a peer-to-peer network of independent computers spread across the globe (distributed). A decentralized system is a subset of a distributed system. The primary difference is how/where the “decision” is made and how the information is shared throughout the control nodes in the system. Distributed means that the processing is shared across multiple nodes, but the decisions may still be centralized in some aspects and use complete system knowledge. In a fully centralized system, control is exerted by just one entity (a person or an enterprise, for example) not a collective of nodes.
Decentralized means that there is no single point where the decision is made. This can be a good or bad thing depending on how you look at it. Every node makes a decision for its own behavior and the resulting system behavior is the aggregate response of all. Decentralized brands are harder to build, but much harder to kill. Bottom-up vs. top-down is very hard for brands that are usually shaped by a single or a few visionaries, but for many this will be an advantage. Because for some the top down approach isn’t working and is being overthrown by a new decentralized bottom-up method to running organizations and networks where authority is no longer in central control. But rather is delegated and spread among many participants. Empowering individuals participating, the ability to manage and contribute to the system. Natively decentralized brands would allow community to remix IP from day one. Decentralization isn’t just simply just a new technological approach. It’s a mindset and culture that doesn’t seek one’s way, but rather focuses on the best way for the entire ecosystem as whole.
DeFi is shaking up the traditional world of finance as we know it
Decentralized finance, or DeFi, aims to use technology to remove intermediaries between parties in a financial transaction. Focusing on peer to peer transactions, decentralized lending, borrowing, and much more. Allowing people to now stake tokens helping to strengthen the network and increase decentralization while also earning yourself APY of 6–20%+. A far cry from the traditional banks saving rates. Cryptocurrencies rise in value also reflects people’s skepticism of central banks and government planners motives, ethics, and competence. And cryptocurrencies underlying protocol of decentralization, is an antidote to solve for these problems. Centralized authority systems is all we have known over the last century, because we haven’t had any other options. Blockchain technology has since revealed the flaw in this architecture. Abuse of power can be avoided. However, this comes at the cost of every participant now taking on some responsibility themselves to maintain the network.
Show me the incentive and i’ll show you the outcome.
Cryptonetworks are built on top of the internet that use consensus mechanisms like blockchains to maintain and update state. These networks use cryptocurrencies (coins/tokens) to incentivize consensus participants (miners/validators) and other network participants. Some cryptonetworks, such as Ethereum or Solana, are general programming platforms that can be used for almost any purpose. Think of software as simply the encoding of human thought, and as such has an almost unbounded design space. As opposed to the old hardware-based networks, that are nearly impossible to rearchitect. Software-based networks can be rearchitected through entrepreneurial innovation and market forces. Allowing for many different special purpose networks to spawn up. Helium for example is a global, distributed network of hotspots that create public, long-range wireless coverage for all on a decentralized open network. Sun Token Network is another example, which aims to be a decentralized solar network that enables solar panel owners to participate in the ecosystem, incentives with token rewards for participating. Allowing solar energy generation and consumption to be a commodity, powered by competition and incentives spread out to anyone who wishes to participate. Arweave serves as a collectively owned hard drive that never forgets. Allowing us to remember and preserve valuable information, apps, and history indefinitely. By preserving history, it prevents others from rewriting it. Something that should be taken very seriously, for those who are versed in histories lessons. There are many other derivatives, each serving different use cases, being created everyday. There is profound value in converting intangible assets into tokens that can be moved, stored and recorded on blockchain. The world is being eaten alive by decentralized networks.
Decentralized networks may not be the silver bullet that will fix all the problems. But they do offer a much better approach than centralized systems. consider the problem of network governance. Social media apps such as Twitter and Facebook leave unaccountable groups of employees to decide how information gets ranked and filtered, which users get promoted and which get banned, and other important governance decisions that are often determined with a bias. These problems can be solved through censorship resistant DAPPS. Cryptonetworks are a powerful way to develop community-owned networks and provide a level playing field for 3rd-party developers, creators, and businesses.
Decentralized networks are the catalyst for bringing power and financial freedom back to individuals.
We are seeing the disastrous effects of central authority play out with the US dollar. Inflation is the state against the people. Central power being the federal reserve, who has the right to print money as they please. The question isn’t red pill vs blue pill, it is orange (bitcoin) vs green (fiat currency). Decentralization vs centralization. The people vs the Fed. Networks that push narrative vs Networks that build and defend consensus together. The general public is starting to wake up to the gimmicks of our previous systems.
As with everything, decentralizations has its pros and cons. Some benefits include, helping the organization grow more organically. Dramatically lowers the risk of systematic failure. By delegating responsibilities this encourages accountability and transparency. Something needed now more than ever. Because every participant now plays a role in the system, this helps to develops more leaders within. Breading innovation and flexibility. Censorship resistance is a beautiful thing that can foster an open culture. Censorship resistance does have flaws, like weeding out bad actors is now a harder thing to do. Some other downsides are to be expected, such as implementations of uniform organization policies are more challenging to enact, than a centralized system would have. Decentralization can also potentially lead to internal unhealthy competition, as everyone feels they now have a say in how things should be ran. It is also harder to start out as a decentralized organization, having no real leader in place can make things harder to get off the ground. It is still a work in progress. But with the help of smart contracts and different protocols, rules and regulations can be encoded.
Web3 enhanced the internet as we know it, with decentralization being the key new feature.
Unlike the internet we are used to where email, passwords, and sensitive personal information to interact with websites. Web3 needs only your crypto wallet address, which allows for participants to remain anonymous if they choose. Yet every transaction is now public history on the blockchain ledger.
Thanks to crypto-economic protocols which provide financial incentives through native token issuance for those who contribute. Normally consumers would have to pay the central organization for services such as bandwidth, storage, hosting, transacting on the internet. Except now with Web3, the money goes back directly to the network participants. Cutting out all the unnecessary and inefficient intermediaries of the old networks. With attribution open to anyone, yet still possible to differentiate what comes directly from the brand, and what’s a community derivative, amplified and validated by the same network that made it. No gatekeepers required. You can be your own bank and send money anywhere. Utility tokens allow participants to vote on the governance of how the protocols function. Tokenization economy provides new ways of building companies. Previously VC money is needed upfront to get things started, which then takes years to receive payout for investors. Through token issuance native to the network, anyone can now participate in building or investing from day one. Stakeholders can use their tokens to vote on changes to the future of the project. If they like what is happening they can hold their tokens, if not they can sell out at anytime. Blockchain data is all public and open transparency, a high contrast to buying equity in private or centralized business, where many things are often cloaked in secrecy. Web3 enables anonymity as well as transparency.
Decentralized Identities
Web3 now offers decentralized identities. Which provide a readable history unique to each person, crypto wallets serving a new soft of public profile. These identities can reman anonymous to their web3 identity or tie to ones personal identity if they choose. Backed by hard evidence, each wallet would showcase the contributions, interests, accomplishments, and activities transacted through the wallet. There is opportunity here to leverage a on-chain reputation for off-chain uses. We may see web3 versions of the online entertainment we have in web2. But instead of the platform owning the material, the ownership is now shifted back to the creator. Allowing them to reap any value tied to these assets. Artists will also be able to identify who their top fans are through the on-chain interactions. Something previously not possible. In the financial realm the decentralized identity could enable an internet native credit score, used for lending, borrowing, or establishing credit with online merchants. On-chain reputation can unlock a wide array of use cases. Re-architecting how talent is matched with projects. Proving an entirely new paradigm for recognizing and compensating labor online. Upending the archaic financial processes and start to provide equitable access to capital to anyone. NFTs are on the forefront of educating. NFTs are a fun way of turning an entire generation into angel investors, content producers, marketers, community managers, patrons of the arts, and technologists. Simply by participating in the ecosystem opens up a multitude of possibilities and opportunities. Connecting people from around the world in new blossoming communities. You can’t get this education anywhere else.
DAOS are organizations run on a blockchain protocol, fully autonomous in accordance with rules encoded via smart contracts
DAOs or decentralized autonomous organizations are tokenized internet communities with shared cap table and bank account. Members all work together to create, distribute, and capture value relative to the shared mission. Flattening hierarchy and creating fluid work streams. We are witnessing a new asset class dominated by online community coordination. Leading the rise of micro-economies. DAOs are currently being used for many different purposes, such as investment, charity, borrowing, fundraising, or buying NFTs. All being different collective organizations owned and managed by the members not influenced by a central authority.
Web1: content distributed to users
Web2: content produced by users and distributed to users
Web3: content produced by users and distributed to users on user controlled platforms
Web3 and decentralization are still in the early phases, with many unknown variables still to be discovered. With new technologies continuing to build on top of it and spawn new ways of doing things. With blockchain, security is now in the hand of the user. Public and private key encryption allows the user to have his own authentication system, ensuring more privacy. It eliminates the need to centralize the storage of usernames and passwords, no more wondering if the system can access your files and spy on you. While decentralizing the web stems from a virtuous and ethical ethos, it is not a perfect solution or fix all. There are loopholes that will be watched and worked through. The decentralization of web3 is still a new and exciting concept. The idea of it all, can be overwhelming at first for those not involved. Implementing this new technology and mindset will require effort to teach and learn because the system and interface will be different from the internet we are used to today. But if it succeeds, decentralization can be a solution to break the monopolistic control we currently see over much of the information we see on the internet. Making it a safer place for people to transact and communicate without the need for intermediaries. Opening up a more dynamic network effect and brand building opportunities. Giving sovereignty back to the individuals.
A lot of people automatically dismiss e-currency as a lost cause because of all the companies that failed since the 1990’s. I hope it’s obvious it was only the centrally controlled nature of those systems that doomed them. I think this is the first time we’re trying a decentralized, non-trust-based system. -Satoshi Nakamoto
