What is Decentralization? The Next Generation of Democracy?

You’ve probably heard of the term decentralization in the context of Cryptocurrencies. For example, Bitcoin is the most decentralized Cryptocurrency which arguably makes it the most desirable as a store of value asset. But decentralization has far-reaching implications for our society and macroeconomy as a whole. In this article, I will explain what decentralization is and what it means to the future of business, democracy and the economy.

Decentralization is a new way for humans to organize themselves without the need for a centralized authority. If you think of how society has been organized up until now, you will notice that for most of history we’ve had kings and queens, or leaders of some sort.?

The problem with this type of centralisation is that it puts disproportionate power in the hands of few. As they say, absolute power corrupts absolutely. This explains the many wars and atrocities that we have had throughout history.

However, over the past century, we have started to develop a new form of society that distributes the power somewhat more fairly among a larger group of people as opposed to the monarchs or supreme leaders.

This new form of governance is what we called democracy or more correctly, representative democracy. The keyword here is representative. It means that a large group of people elect a small group of officials to make decisions on their behalf.?

So once you choose your representative, say a member of Parliament or president or prime minister for example, from then on you can't have direct input into the decisions that they make. And although this form of society is by far better than monarchy or absolute dictatorship, it's far from perfect.?

The Rise of DAOs

We are now entering an entirely new era of decentralization. You can think of it as the next generation of democracy. This is a type of democracy that is not representative. What this means is that we can use technology to organize ourselves, without the need to delegate our decision-making to politicians.?

You may have heard of the term “DAO”, or a decentralized autonomous organization. Right now DAOs are not being used in the context of running society as a whole. We're only seeing early forms of them in some other contexts.

Anyway, for now, you just need to bear in mind these three models, i.e. monarchy or dictatorship, representative democracy, and decentralization.

Of course, I’m simplifying these three different types of organizations. Just like we haven't had a complete transition from monarchy and dictatorship to full democracy we are unlikely to see a complete cut off between representative democracy and decentralization.?These transitions always work as a spectrum and the more people become educated and aware of what is happening and get involved, the smoother these transitions will be.

Technology and Governance

One thing you need to know is that there is an absolute correlation between the evolution of technology and the evolution of political systems. For example, if we look at the evolution of Technology in the post-world war era, we see that the advent of the internet has made it easier for the general public to see what their leaders are up to and hold them accountable for their wrong actions.?

Before we had the Internet and social media, it was much easier for governments to control the dominant narrative in society, thanks to their complete oversight of mass media and broadcasting. However social media has created the possibility for a new form of communication, which you can think of as narrowcasting as opposed to broadcasting.

This narrowcasting is essentially a step towards decentralization. Although this has not been a complete and utter transformation, especially thanks to giant tech corporations who have monopolized control over technology to a great degree.?

However, I would argue that technology has a life of its own and it thrives best in a more diverse and decentralized environment. The more people use, design and engineer technology, the more interesting and varied the outcomes will be. So, the monopoly of Technology in the hands of a few tech giants is not an ideal outcome for its long term evolution.?This could explain the parallel between the three generations of the internet and the evolution of political systems over the past few decades.?

The Birth of Web3.0

Since the 1980s we’ve gone from Web 1.0 which was only suitable for finding information, to Web 2.0 where we all become contributors but create websites and post on social media. Now we are going into Web 3.0 or Web3 for short, where we can read, write, and own digital assets. I have another video where I explain all about Web3.?

For now, all you need to know is that Web3 is decentralized. Or at least it’s meant to be decentralized and this will have massive implications for the future of democracy and governance, just like Web2 helped push democracy into a whole new level.?

More importantly, this whole new evolution has massive implications for your life as an individual. Decentralization not only impacts the shape of our governments but it will also change the way our work is conducted. It will change the nature of corporations and companies that we work in. So as an individual what you want to be doing is educating yourself about this evolution as you go through it. Because it's happening extremely fast and unfortunately it will not take everyone with it. The nature of decentralization is such that it requires active participation. It's not like the two previous models of monarchy and representative democracy, where you could delegate your decision-making to others.

Getting to Grips With A New World Order

Decentralization will disrupt all previous models of governance and organization as we know. It's also somewhat brutal in that it will leave behind anyone who doesn't get involved. This is not because the individuals creating these technologies are bad people, it's the nature of evolution. Technology is a one-way street. You can't slow it down, and you can't stop it. You have to get on board and educate yourself. This is a good thing. It means we will have more autonomy, more ownership of our data, and we can build a fairer economy in a decentralized manner.?

But at the same time, it means that there is no free lunch. Anyone who educates themselves and gets involved will be rewarded handsomely, especially early adopters. And those who fail to do so risk being left behind.?

Now, one important thing that we didn’t discuss in this article is the Technology that underlies decentralization, namely, Blockchain. In my next video, I will explain what Blockchain is and how it can power decentralization.

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