The “C” Word: The Dirtiest Word in Crypto

Centralized Bad. Decentralized Good. A False Dichotomy

There are quite a few terms and concepts that have entered our consciousness since cryptocurrency and blockchain technology entered the world stage. Some of these terms have even taken on a dogmatic and almost religious aire.

One such term is “decentralized.”

And I totally get it! The need for decentralization in the realm of money is obvious and understandable; especially since it’s been co-opted by governments and central banks.

However, there has become such a halo around this concept that its opposite—centralization—has become a dirty word. I'd like to take this opportunity to give some good press to the concept of “centralization,” and explain why it’s not such a scary idea.

The future of crypto will likely look something like this:

Entire communities will be created with decentralized (trustless) first-layer protocol, with centralized and decentralized second-layer apps. The decentralized first-layer acts as a set of agreed upon rules which are locked in, unchangeable, immutable, and predictable.

Some apps will benefit from decentralization and some apps will benefit from centralization. The types of companies and players who choose to build will do so with the understanding that they share a common vision and agree to play by the rules; because to disagree would be to not play at all.

Definitions

I don’t believe people inherently have an issue with centralization. I believe the issue they have is with illegitimate authority—especially as it pertains to government control or corporate monopolies (in partnership with government to intentionally keep out the little guy)

First, a few concepts and definitions to make sure we’re on the same page.

Centralized - The concentration of administrative power in a central government, authority, etc.

Decentralized - To distribute the administrative powers or functions of (a central authority) over a less concentrated area.

Voluntary - Done, made, brought about, undertaken, etc., of one's own accord or by free choice.

Involuntary - Not voluntary; independent of one's will; not by one's own choice.

Benefits of Centralization

Centralization is not a dirty word, and here’s why.

Efficiency

Frisco d'Anconia offers a simple explanation about more efficient record keeping and database management, “If a Blockchain network is not immutable, open or transparent, then a regular database will usually be far more efficient than a Blockchain.” Sometimes, putting something on a blockchain is not the most efficient and effective method for organization.

Less Traffic

Not every coffee needs to be listed on the blockchain. Transactions within a sub-community do not need to be listed on the first-layer blockchain either. Profit-motive incentives, attracting new development, people, jobs, and a wide range of other problems can be solved faster with centralization—even if it’s only a transitional step away from government control toward total decentralization.

Layers of Security

Another (potential) benefit of centralization is that it can provide an extra layer of security. It puts distance between my blockchain first-layer wallet and final transaction. It’s not wise to be giving everyone the account number to your savings account in order to do business with them. This leaves you more open to potential hacks.

Ease of use

I don’t really want to have to use two-factor authentication (2FA) and other enhanced security procedures everytime I make a small transaction. Ideally, I want make one transfer from BTC to another token on a second-layer ecosystem, and then transact within that community with perhaps a less secure wallet.

Customer Service

Especially in early the adoption stages of this new technology, people are going to benefit greatly from having customer service support and a bit of hand-holding. With a decentralized network, you might get some help from the community, but there is no telling what quality of help you’ll receive or if the person helping you even knows enough to help you properly. There is no incentive to providing great top-notch customer service.

What do you think?

So, what do you think? Am I way off base here? Do you think that a dogmatic approach to decentralization is the way to go? Let me know in the comments below.

About the author: Daniel Wagner stays busy as a father of four, writer, creator, political/philosophical commentator, #blockchain enthusiast, and crypto-communicator. He is the Director of Marketing for @AirWire — educating noobs about the #BlockchainIndustry since 2015. Contact him at [email protected]