The Future is Decentralized by Overstock.Com CEO Patrick Byrne is one of my favorite posts of all time. I am going to summarize his sentiments, however, if you have time it’s best you read his article, it is definitely worth it!
The Need for Central Institutions
Central intuitions have been around for centuries. They were created out of the belief that we needed an authority to oversee exchanges. As Byrne puts it “Well, if I have a camel and you’re going to give me a gold coin in exchange for it, I have to trust that you did not debase this coin.” The government would step in, with an army by their side, and take control of the coin. That way if you debased the coin, there would be retribution. Although centralized institutions lead to many other issues, they are supposed to be a third party trust verifier.
Decentralized Knowledge
What’s better than centralized institutions? Decentralized ones. One of the best pieces of economic literature, The Use of Knowledge in Society by FA Hayek, describes how “a single agent [central institution] is only a small fraction of the sum total of knowledge held by all members of society”. Using the power of the people is a far better mechanism in ensuring the best outcome. Since each individual holds much more complete knowledge than a single institution can, the masses can create a better outcome. We have never had the capability of connecting individuals on a large scale. Until blockchain.
Blockchain as the “Bomb”
“With the block chain, we liberals — those of us who have been fighting authoritarianism, whether it’s socialism or fascism or “social justice-ism,” for 500 years — just got “the bomb” in this fight. It’s something new.” Blockchain lets us connect the masses. We each can have a say in the decisions being made, and verify exchanges that have occurred. Instead of needing a central institution to provide verification, we can rely on our peers. Entire communities could adopt blockchain governance that are run by the rules outlined in a community contract. There are many ways to apply blockchain for decentralized governance. The important fact is now we have it. We have the “bomb” to turn the wealth of individual knowledge into a connected group.
Optimism
We have already begun dismantling the powers of central institutions.
The CEO of JPMorgan, Jamie Dimon, for example, wrote a letter to shareholders in April that basically freaked out over the block chain. He told shareholders that “Silicon Valley is coming to eat Wall Street’s lunch.” Since he did that, everybody on Wall Street in the last three months — it seems every day, there is a new announcement coming from another corporation — whether UBS, Credit Suisse, Morgan Stanley, saying “we have to study this and get involved.” But it’s too late for them. A year and a half ago, we started on this, and we’ve been very aggressive about developing new systems that can challenge these old central institutions.
I have great optimism in the future. Instead of needing central institutions to be “trust verifiers”, we as individuals, connected as nodes on a chain, will provide authentication of exchanges. The knowledge of the masses will be the new, decentralized, institution.