The Words, “Decentralized” And “Good”, Do Not Have The Same Meaning

Give yourself a moment to think about how much trust you put in your grocery store. You trust that the food that is being sold to you will be safe, it is your only point of contact on the stock chain of what you eat.

You believe that the products it picks to be sold are the kinds of food you most want to buy. These are quite vital things but the alternate choice would be to find and obtain each of your preferred food items from its source, at a remarkable cost of time and from a set of varieties too bulky to entirely cover. So a trusted intermediary is hired.

The crypto community has made the notion of decentralization virtually a religion, for the past few years. It has become quite close to identical with “good”. The upside to not having to work with an intermediary can be massive, relative to cost savings, control over products and their managing, or matters of trust. But the costs can be noteworthy too.

Centralization, at least where there are economies of scale, suggests lower costs. Blockchain-based applications should be more expensive than the centralized. The blockchain application technology that will most likely be successful is those where the benefits of some sort of decentralization overshadow the cost.

As a technology, blockchain mostly decreases the price of decentralization. The only decentralized payment, before cryptocurrencies, was to give someone cash in person, and that is frequently excessively expensive. Blockchain made it much, much inexpensive. But if a cryptocurrency such Bitcoin was used by everybody, with the stand of technology today, there would be possibly prohibitive costs in utilizing such a payment system. The charge of decentralization has been diseconomies of scale in the processing of transactions. So we go on unquestioning our big banks and credit card companies to announce payment to others.

This could vary with technology or decisions made by those in charge of the currency. Actually, being the owner of Bitcoin today is almost a bet on that happening. Meanwhile, digital currencies and other blockchain applications should show there are causes to be decentralized instead of assuming that decentralization is good for its own sake.