We work with tons of businesses since we operate in the investment preparation industry, and a very common question that we get asked is whether a company should operate centralized vs decentralized in this current internet world.
Let’s start with the basics. There is no right answer here or there is no bad versus good. Centralization is not evil and decentralization is not our savior. Simply put the differences are based on a variety of factors.
The way we like to tell our clients is – decentralization is sort of the evolved version of centralization.
The Concept of Centralized Data
The concept of centralization is simple, all data put into a single place managed by a single entity for the greater good.
Now in theory, this sounds like an easy approach. But we have proven in time that it’s not easy to find someone who would be able to manage the centralized data.
It goes opposite to the concept of democracy. Most technological companies have abused their authorities and their power in this sense by using the data that they were supposed to store by learning from it and using that data without permission in order to provide advertisements or to get more money on their platform in a nutshell.
There are a lot of lawsuits that occurred for those tech companies antitrust just so that everything would fall back in place.
And the reality of the situation, centralization is flawed in this sense.
The Promise of Decentralization
Decentralization provides a concept that is, at this time of the market, a bit utopian. Yes, data does not have to be in a single entity, and that is one of the major differences between centralized vs decentralized.
It’s sort of like democratizing data and in this sense it is much more it feels right. It’s much more safe, it’s much more secure. And it’s not easy for companies to benefit from the data per se.
Given the nature of decentralization opposed to centralization, you would be able to conclude how it’s not easy for companies to shift into the centralization. If Facebook or meta switches their model to decentralization tomorrow, then their revenue from advertisement is going to dramatically fall.
The Current Landscape
Decentralized platforms are out there, but they’re slowly getting traction. Most of the ones that are existing are just used by hardcore fans who want decentralization to work out.
But in order for it to work out in the bigger, wider market, it requires time and it requires that the consumers feel the pain points of centralized architecture. Once you start seeing how centralization in social media or in banking or in health is not the best option. When you see a solution that is better in this sense, this is when you’re going to start shifting slowly and that’s why it’s taking quite a long time.
The Future of Decentralized Platforms
The repulsive power that comes from centralized technological companies, like meta, is also pushing slowly the growth of decentralization. But in time with good products, we’ve seen in the past 15 to 20 years that always the more advanced technology evolves, and wins over the market.
So decentralized data or decentralized architecture is going to be the basis of the future technology that we’re going to rely on.
It just might take a little bit more time.