Trust and the decentralization of the internet

Information exchange happens through multiple dimensions on the internet; between individuals (e.g. email, chat), groups of individuals (e.g. social media, news/publishing/media), organizations/businesses (e.g. online b2b operations), and between businesses and customers (e.g. online b2c operations, e-commerce).
The largest internet companies by revenue and market capitalization today are companies which provide services in one of these dimensions, on top of a centralized architecture.
The most popular email service provider in the Western hemisphere, Google’s Gmail, centrally stores all the emails on their servers, so every email sent to and from a Gmail account travels through and is being stored in a central layer owned by an intermediary who you trust, in this case Google.

Humans have a natural disposition to trust, which is one of the main drivers in our society.
You trust the sure hands of your barber, the soberness of the pilot, the security of your bank, and the good will and expertise of your government.
But is the ancient institution of trust still able to protect our interests in an ever more complex, depersonalized world?
Can you similarly trust your online service provider that your account won’t be hacked, funds or sensitive information stolen, misused?
Is it a wise decision that billions of people grant power for internet monopolies to use their data, and ultimately (indirectly) let them manipulate their emotions?
And last but not least, are centralized systems effective in terms of network bandwidth, safe in terms of cyber security? Is it possible to eliminate all weak components that could potentially compromise an entire system in a centralized architecture?
In the world of cyber security there is always a new threat lurking over the horizon. It is impossible to build a centralized system without a single point of failure.

It is becoming more and more difficult for companies, organizations, and governments to protect their assets from continuous cyber attacks. Banks today calculate operating costs with inevitable losses caused by continuous hacking of their archaic centralized systems.

Open-source software. Peer-to-peer networking. Blockchain. Trustless systems.

If the architecture of applications on the internet (even governance in the future) can become truly decentralized, it will change the way we perceive the meaning of the word “community” in our everyday life.

The idea and technology behind Bitcoin was first published in a cypher-libertarian mailing list at the time of the Great Recession in 2008, by a mysterious person (or a group of people) under the pseudonym “Satoshi Nakamoto”.
The point of Bitcoin was to create a decentralized, trustless monetary system (“digital cash”) independent of governments and central banks.
A distributed (i.e. every node in the network holds a copy of it), immutable ledger of all the transactions validated by a shared consensus, where no intermediaries like financial institutions are needed to create and validate transactions.
(People often argue, that Bitcoin has no real value backing it, opposed to currencies issued by central banks. There is a common misconception about real value backing currencies issued by central banks. Central banks issue fiat money, which does not have an intrinsic value. The only value fiat money has is the trust towards central banks issuing it, a trust in their professional monetary actions.)
I will not go into more details about the challenges Bitcoin faces today (scalability) or about the economics built into the system (scarcity and “mining”), and if these were correctly implemented or not.
Transforming the monetary ecosystem is one of the most significant things that could happen, but the whole idea about decentralization doesn’t stop here.

As a result of the recent success and interest towards the idea behind Bitcoin’s technology, and the discovery of potential use cases of distributed, trustless systems triggered a massive wave in the development of decentralized applications (dApps). A technology that allows to remove intermediaries will entirely change the way the internet works today, and who profits from it.

Imagine a decentralized, open source social media platform similar to Facebook without a central authority and owner like Facebook Inc..
To make this a bit more interesting from a business perspective, imagine that the users of this system could opt-in to let advertisers target them, or to make their data available for companies to analyze (i.e. sell their data), but in lieu of a central service provider all the money spent on advertising or the purchase of data will land in the user’s pocket instead.
A decentralized “ridesharing” platform without Uber taking a fee.
A decentralized “cloud storage” system, where individuals rent their unused disk space or store their data on the distributed network. A secure data storage network without a single point of failure, way under present market prices.

These and several similar projects are already under progressive development, and gain a lot of attention in the community of developers. And investors as well.

So how do investors get in the picture?

In some cases, it makes sense to introduce a decentralized system’s own “token”, a utility token which grants right to interact with the system. If a similar utility token is tradable against fiat money or cryptocurrencies (like Bitcoin) through certain exchanges, investors and individuals holding these utility tokens can place their bets on the future price, and speculate before the technology goes mainstream.

Yet, no one can predict if Bitcoin (or its successor) is here to stay and completely transform our monetary ecosystem, nevertheless it has introduced us something really important: the idea and technology behind decentralized, trustless systems without unnecessary intermediaries. It has triggered the transition towards a fundamentally different approach in the architecture of applications running on the internet – and potentially governance in the future.

Leave a Reply

Your email address will not be published. Required fields are marked *