Decentralization: success factors and obstacles (part 2 of 3)

October 12, 2022 - 4 minutes
Article by Paul Van Vulpen And Edwin Fennema

Blockchain is often about cryptocurrency, the speculation with it and undesirably high energy consumption behind the computing power required. However, blockchain technology can do much more. For example, it can also shape decentralization of centrally regulated entities and encourage unbundling of such entities.

Where do we see good examples of decentralized governance?

Paul: “In Switzerland, for example. Traditionally, this country has had many autonomous local areas. They are used to granting autonomy. There is also voting at the local level, sometimes even still by hand (by raising one's hand in the air - ed.). All this ensures that, on the whole, the Swiss are strongly involved in their immediate environment. Important, because democracy starts at the roots of society. From there you can build the rest. You can clearly see that in a country like Switzerland.”

Edwin: “Looking at it from the other side, this makes Switzerland by far the most successful country in Europe. In technical and economic terms, but also in terms of happiness, income position, food supply; on almost every aspect on which we judge a modern country, Switzerland scores the highest. That has to do with what Paul just told us, which is that in Switzerland everything is taken up as locally as possible. This creates engagement. And when people are engaged, great things can happen. Moreover, this local approach gives the Swiss federal government plenty of time to facilitate the big central issues, such as infrastructure in a country with many natural challenges.”

Paul: “By the way, it is not that we want to turn the Netherlands into a second Switzerland. We just see that the Swiss model has certain characteristics that seem to work well. We want to see what blockchain can do to make the Netherlands an even better country. The involvement of the Dutch in local democracy is only small if you look at the turnout of municipal elections. Apparently, the Dutch care little about what happens in their municipality.”

Edwin: “And this begs the question: with decentralizing technology like blockchain, can we take our country to a level of engagement similar to the Swiss example?”

When technology causes people to become more closely involved, great things can happen.

Do you see any obstacles in that regard?

Paul: “Yes, there are some things that make decentralization complicated. Look, we are currently working with a system that is fundamental to our society. The moment you start tinkering with democracy, you see that many things start to shake. For example, the way our laws are set up, the way our municipality works, the way citizens participate et cetera. It takes quite a lot of adventure and decisiveness to think about decentralization and actually get going. The reason we don't do that right now is because we are quite risk-averse. We are mostly aware of what we can lose and less aware of our new opportunities! So I think we should take small steps, and avoid extremes. The one extreme - leaving everything as it is and not thinking about digital democracy - simply cannot be done. Then the government will soon drown in the wave of digitization that is simply coming. The other extreme - using digital tools too quickly for our society - is not good either. What we might be able to accomplish is to work with a municipality to think about how decentralization might become relevant.”

Edwin: “Risk-averse behavior is in the human DNA. We value more strongly what we lose than what we gain. So when we tell the government that they are losing all or part of their power, the human reaction, regardless of the systemic reaction, is to say "well, we don't like that.' The fear of losing things actually makes us more or less conservative and blind to improvement. Even though the risks need not be great at all. Another thing we have to deal with is that many people see the technology that could facilitate decentralization, namely blockchain, primarily as interesting technology in combination with crypto. But this technology offers much more. And then you automatically reach the next obstacle: for a lot of people, blockchain is still abracadabra. Blockchain is binary born (the technology is new, not a replacement for an already existing analog process- ed.) and it does not represent anything in terms of structure that we already did in the real world. Consequently, many people don't understand how it works. And in something you don't know, you don't invest. And then, an undesirably high energy consumption behind the required computing power does not make it more attractive. A non-argument against a system change, but often heard is, "we first need to investigate how stable this new technology is." Every negative piece of news about a blockchain or coin is then widely reported, quickly leaving people with the view that we don't know enough about blockchain yet. So the lack of understanding of how technical decentralization works is a very important argument as to why it does not take off immediately.”

What is technical decentralization and what role does blockchain play in it?

Paul: “You speak of technical decentralization when you decide not to have your data in a central place, but spread over a network of independent units (individually deciding nodes). These can only work independently on a decision if they can each assume that they have all the data and that it is 'true'. This is the role of blockchain, by which an algorithm ensures that each new block of data MUST be true because it is consistent with previous blocks. So blockchain is a network that no longer requires a central authority to recognize that the data is complete and true. That is exactly what you need for decentralization. People sometimes ask me why you would necessarily want to reduce or remove the power of a central institution with a technical solution. Surely you can do that through legal means? And the answer is Yes if it would be clear who owns the data. After all, with the traditional logic of our current legal system, that is not easy to determine.”

It takes quite a lot of adventure and decisiveness to think about decentralization and actually get going.

Why should we not want a central authority to determine whether something is true?

Paul: “The phenomenon of central parties telling us what is true is also associated with legalism: no matter what reality is, what the law dictates is true. We ourselves live in a pretty legalistic country.”

Edwin: “You could say that if a central body determines for you what is good or bad, you lose a little grip on reality. Because it is quite possible that you want to do something against the law because you are convinced that this is the right decision at that moment. In that sense, by decentralizing you give reality back to the people. Through the technology behind the blockchain, we are rediscovering the power of a society, namely living together consciously”.

Also check out the first article on decentralization "The future is local. You will find Part 3 of this article series on decentralization soon here on Insights.

Do you find blockchain interesting, but lack certain basics? Then read the article What is blockchain?

Related articles
The usefulness of decentralization (I)
Blockchain is often about cryptocurrency, the speculation with it and undesirably high energy consumption ...
What is blockchain?
Blockchain is still sometimes referred to in the media as "the greatest innovation since the Internet. Bu ...
Decentralization and the local economy (III)
Blockchain is often about cryptocurrency, the speculation with it and undesirably high energy consumption ...