Blockchains re-decentralising the Internet
- 7. February 2017
- Posted by: Collin Müller
- Category: Strategy
Large platforms centralising the network
In recent years, a wave of centralisation has started in the network. In many markets, everything is concentrating around one large supplier. Amazon is dominating the online trade. Facebook is the social network. And AirBnB is the provider of overnight accommodation.
In many industries, quasi-monopolists are dominating today. And they are constantly expanding their positions, because their size is generating the fuel needed for further growth.
Firstly, size itself brings an advantage, because the more market participants it brings together, the better the service of a central platform usually gets. Customers want to choose from as many providers as possible and suppliers are happy about a large number of potential customers. Once a platform is ahead of the competition, it can only be attacked by competitors who have to start small.
The monopolists achieve their second advantage with their huge databases. The more data they have available about users and their behaviour, the better their analyses. Those who have access to the largest data repository can easily introduce and test new features and products on the basis of usage analyses and thus improve their services.
The large platforms act as intermediaries between the other market participants. Only they have an almost complete overview of supply, demand and transactions in a market. It seems to be an unwritten law of the digital age that, through this advantage, over time, every industry gets its single centralist provider. Those monopolists are on the one hand the ones who can bring order to a market, but on the other hand are also able to determine the rules of the game for all others.
The big central players are a problem for progress, security, and the free market. They hinder innovation by making it more difficult for new suppliers to enter the market with new ideas. And they are key targets for hackers and censorship. And finally, they are now playing such a dominant role in many sectors that they can dictate the conditions to other market participants who depend on them.
Blockchains can open markets for fairness and innovation
The blockchain has got what it takes to end the centralization wave. It is the technology behind the digital currency Bitcoin. However, it is not only capable of handling financial transactions without central intermediaries. It was invented to organize markets of all kinds without a central authority. It enables market participants – i. e. sellers and consumers – to do business directly with each other in a global network without intermediaries.
Services like AirBnB and Uber could be built on top of a blockchain. It would be possible to decentrally store and publicly view who offers which products at what price. Transactions such as reservations, trips or overnight stays could be stored on the chain . And payments could be made using cryptocurrencies. As all data can be made accessible to customers, it would be easy for them to evaluate the performance of sellers. All without a central authority.
Blockchain to return the net to its open source
In a blockchain, all transactions are publicly visible and run according to the same rules for all participants. As a result, new market participants can offer their services easily and use the settlement processes immediately.
The web was initially completely decentralized, and everyone could participate in the same way. The blockchain has the potential to lead the web back to its origins. It could render obsolete the many central nodes that have formed in recent years.