Centralisation vs. Decentralisation: The Case for Decentralised Structures

Last Updated September 4, 2018
Posted By Luke      No Comments

Have you ever thought about the fact that, whenever you want to complete any task that includes value, you have to go through a third party?

And that ‘value’ doesn’t have to necessarily be financial.

If you want to send money to someone, you need a bank account.

If you want to vote for change, you vote for someone else who then runs ideas and decisions through a government. Your votes are counted by other people that could easily (accidentally or intentionally) miscount. There’s no rigid system in place to prevent someone voting more than once should they really wish.

If you want to buy a house…wow, you have to go through a lot of third parties with that one. Banks, surveyors, solicitors and more.

Blockchain cuts out so-called middlemen so that any transaction of value can occur directly between Person A and Person B, without needing Person C in-between to slow things down, add costs, make things less trustworthy and more.

Centralised structures vs decentralised structures

As you can see from the diagram above, the way that businesses and governments are run is typically in a centralised manner.

But what does this mean? 

More…

Well, when things are centralised, and all things must go through one party or entity, it means a number of things:

  • An unwanted intruder (such as a hacker) can access, modify, steal, or destroy data. As seen with the NHS being hacked and even the PlayStation Network outage, entire systems can be taken down in an instant.
  • Information is available only to those in power — and it can be tampered with if it’s not desirable. It is not 100% trustworthy.
  • Systems are slow — if you want access to information then you need to request it and wait for it, with potentially other cogs in the wheel needing to take place outside of your control too. Your identity may need to be verified and information may need to be requested through several different parties via a chain of command.
  • Systems are expensive — when you need a large amount of people-power to run a system, it’s going to be costly. Wages aren’t cheap!

As well as things to do with vulnerabilities and expenses, centralisation can also stifle creativity and communication, whilst also encouraging dictatorships.

More often than not, people in the workplace are not free to suggest ideas to people in power.

You must respect a chain of command; going to your boss, who will then go to his boss and so on. Again, this is an expensive process in both time and money.

If at any point someone disagrees with your idea, it could be shot down before ever reaching the top.

But what if the CEO of your company would have liked your idea?

What if it had led to an upturn in results for both the business and yourself?

There may also be times when the person in power, or control, is not in the office. Is someone empowered to make an important decision in their absence? This is often not the case.

Centralised structures can be inflexible and limiting, whilst power in a centralised organisation is significantly top-heavy.

Let’s compare the above to blockchain, and the benefits of decentralisation:

  • Because the blockchain is powered by thousands of computers all around the world, it means that if you wished to hack the system, you’d need to hack every single block that has ever been made — that are all separately encrypted to an extremely high level — simultaneously. You’d need to rewrite the entire history of the blockchain. It is theoretically still possible, but practically impossible.
  • Information in the blockchain is permanent, irreversible and uneditable. It is verified for accuracy by multiple people (known as miners) all over the world and then it is stored in a public ledger that is visible to anyone that wishes to see it. Each miner can only verify information when they can prove it is true. This means that every single piece of information stored in a blockchain is 100% trustworthy.
  • Blockchain technology is incredibly fast and cheap because you’re relying almost entirely on computing power for the process. To compare the speed and time; if you wished to send money to a third-world country via a bank, you will typically be charged or taxed between 8-15% and it will take 3-7 days to get there. With cryptocurrencies, and blockchain, the money can be there within 10 minutes and will cost you just 1.5%, or less.

Banks, surveyors and a monstrous range of other third parties have always been necessary as a system of trust.

However, as well as being slow and expensive, it is impossible for these third parties to be 100% trustworthy in their current form (and in reality, they’re far from it).

Many people view Bitcoin with negative connotations; with its sole use being to allow bad people to buy bad things on secret parts of the internet. On balance, this couldn’t be more inaccurate.

Thanks to Bitcoin, in the future, buying bad things will be, potentially, significantly harder — because of the open ledger.

Just because things on the ledger are anonymous, it doesn’t make them untraceable. Bitcoin is not the entirely anonymous currency that criminals once hoped it to be.

As well as dwindling out as the preferred payment method of criminals on the dark web, a decentralised blockchain could, and should, also help to reduce financial fraud to a minimum — or even make it impossible — due to every transaction being publicly available to anyone with an internet connection.

Decentralised structures could also help businesses be more effective in working, communicating and growing as a result.

With more people given more responsibility to make decisions, higher levels of management can spend more time doing what they’re best at in order to pursue the long-term goals of the organisation.

Not only is there a more even spread of power, there’s a much greater emphasis on accountability too. There’s no more passing the buck or playing the blame game when bad decisions are made.

Bad decisions are actually less likely to happen overall due to employees having greater responsibility and the opportunity to make a noticeable difference — and potentially be rewarded for doing so.

With more people communicating, empowered to make decisions and responsible for their own actions, innovation and flexibility becomes natural. Suggestions are encouraged and time delays through chain-of-command bottlenecks are avoided.

The future is decentralised.

It is now possible to start and run an entire business with blockchain, through something called a DAO — a Decentralised Autonomous Organisation

First made possible thanks to Ethereum, a DAO brings new possibilities that the world of business would never have imagined.

These are still in the experimental phase at the moment and the intricacies of running a DAO successfully — both socially and scientifically — are not yet certain.

Using ‘smart contracts’ — again made possible thanks to Ethereum — businesses of the future may be able to run without any one person, or board of persons, needing to control and govern them.

These structures are obviously quite complex and we’ll leave out much of the technical information here, but the basics can be quite simple to comprehend:

An owner of a DAO gives power to members of the organisation in the form of voting rights.

Certain members, depending on their role, will have more weight to their votes than others.

Any idea can be put to a vote in the form of a proposal, and if the proposal receives enough votes in the allocated time then the change or improvement would be initiated automatically.

This can allow us to do something that is currently almost incomprehensible to our brains based on how life until this point has been:

We now have the power to automate trust.

This would simply not be possible in a centralised system where trust can be abused, bought or wrongfully assigned.

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