The Decentralisation Revolution: Now no-one and everyone can own networking power

Perhaps the line of logic here is a bit complicated but in my view the line of logic will be repeated again and again in the next few years. It goes as follows:

When the internet was first developed two important principles were central to its design. The first was that the internet as conceived by Robert E Kahn and Vint Cerf (1970’s) was designed to operate in a decentralised way with no centre. Strangely it was those who were most powerful in their centre that were first movers with this technology as they moved to globalise their power and influence. Even those who offer us decentralised platforms are really centralists or netarchists (a kind of network capitalist if you peel the layers back.  The second principle – what was originally known as the End to End principle (1981) – argued that the management of communications should ideally occur as close to the end points of these communications, or in other words by the users as far away from the centre as possible. The same was true for resources and the only exception for any kind of centralised influence should be to improve the way the whole system operated. This later idea then evolved (Tim Wu 2003) into what we now call net neutrality  – where all content, sites and platforms are treated equally.

As we look at the internet now these two principles stand in stark contrast to contemporary reality. While Amazon, Facebook and Twitter offer wonderful platforms for everyday collaboration and communication they do so in a way whereby they profit through taking very small amounts of reyenue (often through advertising) in every transaction their platforms facilitate. However while the sheer volume of transactions has made them among the most powerful corporations on the planet the reality of networking technology is that unlike previous traditional supplier – customer relations over two thirds of the material value of any networking transaction and almost all the social value of that same transaction is captured by the user not the supplier. This change in the dynamics of value is slowly eroding the power of those that supply (the centralists) and enhancing the power of those that collaborate.

The history of ride sharing is illustrative. Although Uber only started in late 2009, it has in its short life changed forever (and in some cases destroyed) what many of us call the taxi industry on a global scale. Its cashless app based system, with its emphasis on more personalised relationships now operates in over 60 countries and is worth an estimated 62.5 billion. This is phase 1 of the journey to the networked society where the power of the network challenges the power of place based incumbents. But as its success has grown it has also generated copycats like Lyft and Ola where scooters and rickshaws are part of the mix. In other words its design and the app based technology platforms on which it relies are extremely difficult to protect in an environment where the ability to replicate, slightly amend or improve on what is being used costs very little. The half life of incumbency is shortening and this knowledge drives a desire for those same incumbents to evolve faster than the competition which in a sense exaggerates the issue. This is phase 2 where the power in the network becomes both more concentrated, far reaching and diffuse at the same time. 

However in recent times Uber employees have begun to complain about the arbitrary way that the parent organisation changes prices in ways that impacts their livelihoods. In other words it has despite the rhetoric of sharing and benefit, started to behave in exactly the same way as the suppliers in the sectors it proposes to replace. Enter Arcade City – a game based app that by using a decentralised transaction technology called Ethereum (the same one that runs bitcoin) will provide a similar service to Uber and it will ultimately be owned by the drivers themselves who will organise through mesh technology in the same way a swarm of bees does. In other words just as Uber ‘uberised’  the taxi industry, Arcade City (so far only in the US and Australia) will uberise or more properly swarm overUber. If it lives up to its promise it will represent the real promise of the a collaborative and sharing economy. This is phase 3 of the journey where control through centralisation is removed in the network in a way where those that create value at the decentralised outer also share in the value that is created. 

In summary the point is this. In the initial phase of networking power, first movers through using technology are able to offer very competitive products and services with lower transaction costs and relationships that are more customer centric and personalised. However they essentially keep the old centralised model of control and make good (sometimes fabulous) money in the process. But as success is recognised, the nature of networking technology makes it easy to copy and/or adapt that same idea to more specialised needs thereby beginning the process that causes the original offering to disappear (think Napster) or evolve.  NOW though decentralised software like Ethereum operating on the internet platform that was also decentralised in the way it was conceived  (where this note started) there is the possibility or the development of very different communities. These networked entities are by design able to offer even better products and services with lower transaction costs as well as delivering great social benefits at the same time.

As this decentralisation revolution occurs we will finally see the realisation of the true potential of the internet – a reconstitution of the power and wealth relationships on the planet where exploitation and marginalisation is removed from the narrative, because those who see this occurring will now have access to options and solutions that avoid that possibility. Most importantly this fundamental power shift will help humanity rethink the necessary relationships it needs to have with the planet if it is to save itself from the damage to the environmental settings it requires to thrive.

Leave a Reply