That was not was the intention!

The fact that Satoshi published the white paper just a few weeks after the major financial crash was related to his initial idea of using the decentralized nature of the Bitcoin blockchain to remove power from financial intermediaries such as banks and return it to the citizens. That fact that one of the companies that can be very much blamed for the financial crisis, the JP Morgan bank, recently introduced its own “coin” is a development that can best be described as “special” — especially as this is used for a closed, so-called “permissioned” blockchain that can only be accessed by JP Morgen and selected customers. This is something that completely goes against the open and transparent ideology that has been used for designing blockchain technology.

The same applies to the Facebook “coin”. Experts refer to it as “regaining control over your own data” (or “killer app”, which I discussed in a previous post) which is one of the biggest advantages of the blockchain technology. The fact that Facebook, the company that has been so controversial in recent times due to its disproportionate slurping and abusing of data, is developing its own “coin” has led to many experts ringing the alarm bells; will the decentralized character of blockchain not be lost again, because of a few large companies who will run away with the technology? It is not a thought that scares everybody immediately; when a small percentage of Facebook users use the “coin”, the number of worldwide crypto users would double immediately. That sounds positive for the adoption and further development of the ecosystem. The most recent research from the European Union seems to confirm this. The study shows that it is precisely the private (often corporate) platforms that drive the adoption, rather than the open ones, such as Bitcoin. This is mainly because the developers of the closed platforms have much more freedom over the further development in the field of safety and speed, where open platform developers discuss and decide these kinds of further developments in a decentralized manner, which often requires a lot of time.

According to the definition, decentralization includes the distribution of various functionalities, power, people and all sorts of things from a central point. This ideology was initially witnessed at various large technology companies such as Spotify, who took away the distribution of music from the major distributors and placed it back with the musicians themselves. Uber did the same as it took away the power from large taxi companies and placed it with the drivers, and Paypal did so too by transferring bank transactions from the banks to the owners of the money. Unfortunately, we see many of this kind of company centralizing power in all kinds of ways themselves by, for example, buying up innovative startups, increasing entry barriers for competitors to a sector, or simply increasing their often almost monopolistic market share.

The same is currently happening with blockchain technology, especially in the area of maintenance (“mining”) of the blockchain networks and ownership of the most important cryptocurrency. The top 6 largest maintainers of the Bitcoin blockchain, the so-called “miners”, control 75% of the global network because of their computer power. Some 75% of all this global mining capacity hails from China. What about the ownership of the coveted Bitcoins? The top 1,000 addresses own 40% of the total number of circulating Bitcoins.

Whereas the so-called “Initial Coin Offerings” (the blockchain alternative of the IPO of a company) contained many beautiful, decentralized properties, the so-called “Security Token Offering” (which I referred to in my previous post as the most-hyped cryptocurrency of 2019) has again had a lot of dealings with central authorities. Stablecoins too (which I previously described as a very important development in the field of cryptocurrency) remove the important, decentralized properties such as executing transactions without an intermediary while it is exactly these properties that made cryptocurrency so popular and practical.

Someone from the Dutch Central Bank recently asked me about the impact of blockchain during my keynote and “whether you want to decentralize everything”, whether it is good to remove authority where possible and place the power back with the citizen. Various platforms that aimed to do this with via the Internet in the past few years suddenly faced their social limits in many ways, after which everyone turned to the central governments for measures. It’s nice that they are still around, isn’t it?

Personally, I do not believe that every part of society is better off decentralized. However, I do already see many groundbreaking applications of the blockchain technology that, by means of decentralization, can have a tremendous impact on our society, and that would not have emerged if they were governed centrally. And this is despite the fact that we have only just begun development….

Jan Scheele is active in the web3 (blockchain, crypto, NFTs, DeFi) industry since 2013. Besides (former) CEO of a web3 scaleup and founder of an advisory boutique (working for governments, family offices and several multinationals), he is Digital Leader at the World Economic Forum and Board Member at the Blockchain Netherlands Foundation (BCNL). He is writing, consulting, speaking and training regularly about everything web3, all over the world. Furthermore, he is currently finalizing his book about the rise and global impact of blockchain technology.