Decentralization - A Utopian dream?

There have been and are numerous examples of decentralized governance systems in the world. This could be viewed in local self-governance in politics, employee-owned organizations and certain cultures have decentralization built into their ethos. However, there is an efficiency that centralization brings in which is often traded off with the benefits of decentralization due to utilitarian considerations.

This happens due to the time required to arrive at a consensus in decentralized systems. Consensus in these systems is often time-consuming with disparate views. Stability, the concentration of power, vision, and authority are often viewed as effective tools to drive policy, law, and business. This often gives people a sense of tangible accountability through clear representation. This leads to a reduction in redundant processes, uniform vision, and clear execution. However, is a centralized system utilitarian if it ensures the minority views and rights are protected?

What is clear is that each system, be it centralized or decentralized, has its own value propositions. It boils down to the nature of operations, and the risks involved, requiring centralized authority versus the systemic risks of market manipulation posed by decentralized governance.

Finance has been proven to be inefficient when centralized and risky when decentralized. Decentralization, web3, or even the blockchain is not a panacea for all the ills that plague the world of finance and governance. However, decentralization of technology, ownership, and finance can be achieved while maintaining the centralization of management for efficiency. The decentralization of finance gives back power to the user through self-custody and decision-making while allowing organizations to work in the best interest of their customers.

This is not the first-time decentralization has taken place. Since the dawn of organized governance, trade and finance were the fiefs of the archaic despot. As civilizations grew and governance became more decentralized, we saw decentralization 1.0, the dawn of trade guilds. Decentralization 2.0 came a millennium or so later. Monarchies fell, and democracies rose from the ashes and somewhere in between “free markets” were coined. Each time one of these waves of decentralization hits, the problems associated with having a marketplace with no guard rails are exposed. India, during the dawn of the Bretton Woods free market era saw that its domestic markets needed capacity building before they could compete with foreign industry. This doesn’t mean that free markets or decentralization are bad, merely that there exists a middle ground, which affords the greenest pastures.

Now, the control of money has remained with the Government during these two tranches of decentralization and is still with the government. Decentralization 3.0 via web 3.0 is currently taking place. If we think it’s going to be an easy transition with no middle ground, we would only be kidding ourselves. Look at the struggles during decentralization 1.0 and 2.0. However, if we feel this will fail completely, take a good look at the past. The people eventually get what they want, whether it’s the best solution only time can tell.?