TRANSLATION: Why decentralization is important

Chris Dixon (venture capital aksakal, otherwise not to say) in the article below reported the following picture:

1. Open protocols formed the basis of the Internet. But the main thing is their quality - openness, which motivated interested users to use them without looking back (“they will not drown the common boat”). So the web grew.
2. Over open protocols began to build businesses, satisfying user requests. This gave rise to centralized solutions (Google / Facebook / Twitter etc.), which helped users, but began to slow down technological growth and sparked public debate. Encumbrance size slows down market leaders.
3. Due to the fact that the Internet stores the space of “human thought cast in the code” (the author's term), and it is limitless, you can endlessly rearrange the options for satisfying people's requests in the form of software. The program layer is easy to adapt to the situation and spread to the whole world almost instantly.
4. Crypto networks retain the attractiveness of openness (1) and the capabilities of the “software gun” (3), as a result of which centralized IT corporations (2) will change dramatically.

The first and second epochs of the Internet

In the first era of the Internet - from the 1980s to the early 2000s - services operated on open protocols owned by the entire Internet community. People and organizations could calmly strengthen their positions on the Web in full confidence that the rules of the game would not change. It was then that the main web giants were born, such as Yahoo, Google, Amazon, Facebook, LindedIn and YouTube. At the same time, centralized platforms like AOL began to take positions.

In the middle of the zero a second era of the Internet has arrived, which continues to this day. The technical capabilities of open protocols have begun to keep pace with the rapid development of software and services of commercial high-tech companies, in particular, such as Google, Apple, Facebook and Amazon (GAFA). The revolution in the smartphone market has only added fuel to the fire, as a large proportion of network traffic has become mobile applications. As a result, users have moved from open services to more complex and centralized services. Even access to open protocols (to the Network) is obtained mainly through the GAFA software and services filter.

The good news is that now there are a lot of great digital solutions available to billions of people, often for free. The bad news is that for startups, content makers and other market participants, it has become much more difficult to expand their Internet presence, because a sudden change in the rules of a centralized platform is fraught with a loss of profits and audience. This in turn inhibits development and innovation, depriving the Internet of dynamism and diversity. Centralization also creates new public problems around which heated debates are now underway: fake news, state-owned bot factories, deplatformatization of users of social networks (imprisonment of speech in university areas), EU laws and the bias of data processing and commentary systems violating privacy rights. Over the years, tensions around these issues will only grow.

"Web 3" - the third era of the Internet

One of the possible solutions to the centralization problem is the control of large Internet corporations by the state. Such a proposal is entirely based on the assumption that the Internet is similar to the old forms of communication (telephone, radio, television). However, the connection in them depends solely on the hardware, while the Internet is at the forefront of software. A network that depends entirely on hardware is almost impossible to rebuild after creation. However, if the work of the network depends on software, then market forces and entrepreneurial innovations will influence its development.

The Internet is the perfect software network; it has a fairly simple kernel , around which billions of computers are assembled, and the computer can always be reprogrammed. Software, in fact, is pure human thought in a digital wrapper, which opens up unlimited scope for design. Computers connected to the Network can run almost any user software. If something can be imagined, it can be quickly distributed via the Internet using the right levers. It is on such levers and technological innovation that the whole architecture of the Internet rests.

The evolution of the Internet is still in its infancy: over the next decades, the central Internet services will be rebuilt many more times. The driving force behind these changes will be crypto-economic networks as a more general application of ideas initiated by Bitcoin and taken up by Ethereum. Crypto networks combine the advantages of the first two eras: they are in the hands of the Internet community, are decentralized, and by their capabilities will overtake the most complex centralized services in the future.

Why spend decentralization?

Decentralization is often misunderstood. For example, some believe that advocates of crypto networks are advocating for decentralization solely because of their libertarian views or because they are struggling with state censorship. However, decentralization is not important.

What is the problem of centralized platforms? They have a predictable life cycle. At the beginning of the journey, they are struggling to gain a user base and enlist the support of third parties (developers, other firms, the media). So the value of the service increases, and the platform is by definition a system with a multi-faceted network effect.

Sigmoid platform life cycle in conjunction with its users

As the platform moves up the sigmoid of adaptation, it gains more and more influence over users and third parties. At the top of the curve, the dynamics between the platform and the users turn into an antagonistic game. After that, the easiest way to continue growth is to collect user data and compete with these same third parties, trying to discourage their profits and users. Examples from history: Microsoft and Netscape, Google and Yelp, Facebook and Zynga, Twitter and its unofficial clients. With an OS like iOS and Android, things are better, but even they are not without sin: they take a fat tax of 30% from applications, are denied access to the store for contrived reasons and replace the functions of third-party applications as they please.

For independent developers and market participants, such a transition from cooperation to competition seems to be a setup. Over time, even the best entrepreneurs, developers and investors began to realize that building on top of a centralized platform is not the best idea. The history of more than one decade is direct evidence of that. In addition, it harms end-users: they sacrifice privacy, allow others to manage their data and become vulnerable to security failures. And in the future, the problems of centralization will only deepen.

Introduction to Crypto Networks

Crypto networks are networks built on top of the Internet that:

1) use mechanisms to achieve consensus like a blockchain to guarantee operation and update network status

2) use cryptocurrencies (coins / tokens) to motivate parties to consensus (miners / validators) and other participants in the network.

Some crypto networks (for example, Ethereum) are platforms for general programming and are suitable for almost any purpose. Other crypto networks are narrowly targeted, the same Bitcoin is used as a store of savings, Golem is used for computing, and Filecoin is used for decentralized file storage.

Early Internet protocols were created by working groups and NGOs on technical standards, whose popularity depended on satisfying the requests of all Internet users. In the early stages of the development of the Network, this system worked well, but since the beginning of the 90s new popular protocols have practically not appeared. Crypto networks solve this problem with the help of tokens, which represent enough economic incentives for developers, network users and everyone who supports its work. In terms of technical devices, such networks are also much more flexible and diverse. For example, they can maintain their state and at the same time carry out manipulations with it, which was impossible earlier.

Crypto networks have several defense mechanisms that ensure neutrality as they grow and do not allow them to slip into deceptive maneuvers of centralized platforms. First, all communication between crypto networks and their users works only on open source. Secondly, crypto networks rely on voice and exit mechanisms. The community gives participants voice (voice), both on the principle of onchain (that is, through the protocol itself), and on the principle of ofchanin (through social mechanisms built around the protocol). Participants can exit (exit) from the network either by selling coins, or in special cases by creating their own fork of the protocol.

Simply put, participants in a crypto network are united by a common incentive — the development of this network itself and the value of tokens. It is thanks to this structure that Bitcoin is still thriving, contrary to all predictions of skeptics, even though the emergence of successful competitors like Ethereum.

Today, crypto networks still have enough flaws that prevent them from violating the status quo set by centralized networks. Now the main problems are performance and scalability. Over the next few years, these problems will be solved, and the infrastructure of cryptospace will be designed. Then, on the basis of the finished infrastructure, applications will already be created.

Why does decentralization win?

It's one thing to list the benefits of crypto networks, it's quite another to say that they will win. Let's look at the pros, which paint an optimistic picture of the future.

Web services and software are made by developers. Experienced developers around the world - millions. Of these, only a small proportion work in large IT-corporations, and of those even less engaged in the development of new products. Most of the most important software development projects in history have been launched through start-ups or independent developers.

“Whoever you are, most of the smartest people work for someone else.”
Bill Joy

Decentralized networks will lead the third era of the Internet for the same reason that they headed the first one: they will win the hearts of entrepreneurs and developers.

A striking example here will be Wikipedia rivalry with its centralized competitors like Encarta at the dawn of zero. If we compare both services at the beginning of the last decade, then Encarta comes out a clear winner: there is a greater variety of topics, more accurate information and a generally higher-quality product. However, Wikipedia developed much faster, and all thanks to the active community of volunteers who were attracted by the ideas of decentralization and open access to the content of the site. By 2005, Wikipedia has already become the most popular information resource on the web. In 2009, the Encarta project was closed.

The lesson is this: when comparing centralized and decentralized systems, they must be considered as dynamic processes, not a static finished product. At launch, centralized systems are usually more attractive, but their further development rests solely on the shoulders of the employees of the sponsoring company. Decentralized systems often enter the market raw, but with the right strategy, their influence grows exponentially with each new participant in the process.

There are several such ever-growing cycles for crypto networks: developers of the main protocol, developers of additional crypto networks, developers of third-party applications and service providers who monitor the network. All these processes are further stimulated by tokens, thanks to which crypto networks develop simply at a reactive speed, as we have already seen with Bitcoin and Ethereum (which, however, does not always lead to good consequences, take the same wasteful power consumption due to mining of bitcoins).

Which process will lead the new era, centralization or decentralization? In the end, it all comes down to the quality of products, for which, in turn, there is only one question: who will have more developers, professionals and entrepreneurs? GAFA has its advantages: huge funds, extensive user base and well-established infrastructure. The potential of crypto networks, in turn, may be much more attractive for developers and entrepreneurs. If they can be won back, it will be easy to outrun GAFA in terms of resources, which ultimately means lightning-fast development and a better product.

If you asked people in '89 what they lack in life, they would hardly have said: "we need a decentralized network of information nodes connected to each other by hypertext."
Farmer & farmer

At launch, centralized platforms can often boast of excellent applications: Facebook had enough social "chips", and the iPhone also had its own key applications. Decentralized platforms, on the other hand, often launch raw, without any obvious direction. Thus, they need to go through two phases before finding a place in the market:

1) to establish harmony between the platform and the developers / entrepreneurs that modify it, on which the work of the entire ecosystem depends and

2) to establish harmony between the platform / ecosystem and end users.

This two-step process often makes it difficult to see the full potential of decentralized platforms, even by experienced technologists.

The Next Age of the Internet

Decentralized networks are not a panacea and will not save the Internet from all ills. But compared to other systems, they definitely benefit.

Compare the problem of spam on Twitter and spam by email. Twitter owners have closed access to their network to independent developers. Thus, he has to deal with all the spam himself. At the same time, hundreds of companies worked on the spam email problem, infusing billions of dollars in venture capital and private funds. Yes, spam was not completely eradicated, but now things are clearly much better, and all because the email protocol is decentralized, which allowed independent interested groups to create a business based on it and not be afraid that the rules of the game suddenly change.

Or take the problem of network management. How is the categorization and filtering of information? Whom will untwist, and whom - ban? For large platforms, this and other important issues are resolved by a separate group of employees who do not bear any responsibility to anyone. In crypto networks, these issues are solved by the whole community, all decision-making mechanisms are transparent and open. As we know from the real world, democracy is not perfect, but there are no better alternatives.

Centralized platforms have so long ago ruled the market that people simply forgot that there is some kind of alternative. Crypto networks are such a powerful alternative: they will return the user control over the development of the Network, as well as create transparent conditions for independent developers, firms and content makers. Decentralization has already proven its worth during the first era of the Internet. We hope she will return in the next one.