Wednesday, December 11, 2013

What, Exactly, does Decentralization Change?

Decentralization in many parts of the world is increasing (see, for example, this recent study published in the Journal of Public Deliberation on the development and politics of subnational decentralization).
Some studies have examined decentralized versus centralized markets, and have shown, for example, that in certain conditions, a decentralized market is more efficient than a centralized marketplace.  Decentralized markets generally produce superior outcomes in the context of surplus when friction is reduced, or exists at a minimal level, and is small.  This raises the question of how "frictions" should be evaluated in the information economy, and suggests that "official attempts to manage economics" should be reduced wherever possible.  Organizations - including governments - that fail to either implement or adapt to decentralization will be absorbed by individuals, associations, and firms that demonstrate capacity to navigate an increasingly decentralized society.

Here I am not speaking of administrative decentralization, but rather a larger view, which includes political, fiscal, economic, and even personal and familial identity decentralization.   In this larger view, individuals and associations are empowered by their new-found realization that they can, merely through collective participation in the decentralization of financial systems (including individuals' and collective choices as to what we will fund in a giving economy), do away with most of what has traditionally been accomplished by government - and either continue it through funding of certain activities, or discontinue it by not funding others.  This also affects how people will in the near future develop the internet itself.  Broken trust in the common Certificate Authority (CA) system means more people will be turning to decentralized and open source solutions (such as TACK) to alter or replace the standard CA system, which until now has been assumed to be "just how things are done on the internet."

Wherever a potentially beneficial result occurs from government policy, such as reducing the potential for economic collapse via implementation of the Volcker rule, there should be maximum flexibility granted to innovators and participants in the new economy.  It should be understood that as part of this process, not only will some governments disappear and be replaced by  new organizations (or be done away with entirely in the transition to a new civil society), but as well, traditional financial institutions will eventually fade.  A good area to examine these developments is in the decline and death of banks as we understand them today.  The transition to a decentralized economy is accelerated by development of privacy enhancements (to the extent that those enhancements also spread in a free, open source, and decentralized fashion, which reduces the previously mentioned frictions).  These enhancements are now beginning to be implemented in not just one, but various decentralized currency protocols, which marks a historic point in what could be described as a revolution of purchasing power imparted to the individual.

"Bitcoin is really that revolution... I call it the seed of the resistance."  - Max Keiser

And that's all for this week, folks.  See you next Tuesday (that's a promise.)

Recommended Reading:

How to use bitcoin anonymously
Thoughts on alt-coins and diversification
FreeBSD moves away from Intel, Via
Cryptabyte - free cryptographic messaging service
KryptoKit -  one method for using bitcoins anywhere, even with places that don't yet accept them
Darkwallet - open source, decentralized wallet supporting bitcoin transaction anonymity, now 200% funded (over 100% of target level of USD donations, over 100% funded from bitcoin donations)
Sparecoins - open source, decentralized bitcoin wallet - in your browser.
The Largest Investment in a Bitcoin Product in known history:
Coinbase to use equivalent of $25 million USD to protect customers' bitcoins offline.
BitPhone - turns decentralized virtual protocol (namecoin) into a phone.  Yep, a phone.
"By using an autonomous, distributed communications network based on BitCoin principles, BitPhones require nothing but a shared network to send & receive messages, make voice and video calls, share photos, transfer files or run applications of all sorts."
BitGive Foundation (Give a Bit This Holiday Season)

Recommended Video Interview (added Thursday, Dec. 12, 2013):

"One of the problems that decentralization solves... is the difficulty of information moving around within centralized systems... Instead of... giving money to a central group of individuals... the best thing is to actually go to the source itself.... Instead of going to a centralized point.... you go to specific points and you've done away with a big part of the knowledge problem...."
"Sometimes peer-to-peer systems are the right approach.... or sometimes you really want both, because both lend themselves to some aspects of the problem."
-- Max Marty,
Co-founder and Chairman of the Board; former CEO,
Co-founder and CEO of Spotsell (as of Nov. 2013)

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