Decentralization: A Natural Shift in Human Connectivity and Commerce
The concept of decentralization has flourished since the introduction of Bitcoin and other cryptocurrencies. The traditional centralized model — whether for money or organizational structures — seems on the verge of a great shift.
This has become evident in the recent rise of bitcoin’s price, which has seen it trade at over $4,000 USD — an all time high. Moreover, Japan accepting bitcoin as a legal payment method, as well as the Bitcoin community’s ability to successfully fork and overcome its existing issues (for the time being) has demonstrated resilience.
Despite all these great events, some people may still come to doubt this movement and, naturally, others will support it. So how can we further validate this growth and movement, this natural shift to a more organic approach to systems?
To highlight the concept, it helps to zoom out and shift the focus to a more holistic perspective that includes many different aspects of our societies, not just the ones we deal with on a personal level. The range can be from accommodation to transport to work, and many other sectors needed for a functioning society. Here lay examples we can point out to give evidence to a shift from centralization to decentralization.
Strong examples include the shift from hotel rooms to Airbnb, taxis to Uber, trains and buses to BlahBlahCar, from purchasing goods that may be used once to simply borrowing them.
It is also important to note that in any case, the revenue is mostly distributed to the provider rather than a centralized organization that acts as the “middleman” in the process. As PwC has mentioned: “On average, over 85 percent of the value of transactions facilitated by sharing economy platforms is received by the provider rather than the platform.”
“The Sharing Economy has now become the growth sector to invest in. It’s growing at an incredibly fast rate, faster than Facebook, Google and Yahoo together. What makes it valuable is that it not only provides an exceptional investment opportunity and economically is growing incredibly fast, but it puts the environment and sustainability at the heart of the way in which it operates.”
To clarify such a concept, one can take a deeper look into the industries involved with the peer-to-peer movement to see why this economy is growing at such a rapid rate. It seems that a lot of it has to do with the advancement of technology — widespread use of smartphones, greater connectivity and ease of use when dealing with modern websites and applications.
Passive Income From Decentralization of Unused Space, Products and More
To simplify the concept, we can take a look at the number of spare rooms available in people’s homes to that of hotels. The number of cars with an empty seat traveling on a daily basis to that of buses or trains. Furthermore, compare the concept of borrowing something you may only need once or twice to that of purchasing a brand new product.
It does not take much thought to realize that people have always had the greatest strength in numbers. Naturally, it would be hard for a central organization to compete with the open peer-to-peer model when it comes to affordability, availability and a rewarding system that ensures its providers receive most of the value.
This would justify the rapid growth in this industry. As mentioned by PwC regarding the overall value and growth within Europe:
“Over the coming decade, the strength of the sharing economy could well see it become a shining beacon of growth amid a “new normal” of lower growth across Europe. We project sharing economy revenues will grow at roughly 35 percent per year, around ten times faster than the wider economy as a whole – which we expect to expand at roughly 3 percent per year over the same period.”
The Obsolete Role of the Middleman
One of the most useful aspects of the sharing economy is that people are rewarded for their unused rooms, household items and tools, money, empty car seats while travelling and the many other things that one can share to generate a passive income. This growth has rapidly inclined over the years. As PwC shows:
Rewarding users and removing the middleman is exactly what blockchain is designed to do. It does this innately due to its decentralized, peer-to-peer structure, which allows people or machines to directly deal with one another.
So if we were to apply this to our existing environments, how could we alter them?
In theory, many of the existing platforms are centralized in that they still require a middleman. You can look at the popular Uber model, for example, which takes 20 percent of the ride fair for generating the lead. At first glance this may seem fair given they are doing the marketing, PR work and many other things to help promote the community. But is it really necessary?
True decentralization and peer-to-peer systems should aim to completely remove the middleman, while empowering people to deal with each other.
To better elaborate, compare eBay or Amazon to OpenBazaar. You could essentially look at eBay as a decentralized marketplace given that eBay itself does not deal with shipment, selling of items or even the payment — as it is handled by PayPal. Though in the process, both eBay and PayPal charge a fee. As mentioned by an article on Steemit:
“If you aren’t familiar with the system eBay will typically charge you 10 percent for the final value fee on the entire sale price including shipping. YEP, you are getting feed on the shipping cost as well. Now if you have an eBay store which costs you every month you will have usually a 9 percent fee. Certain categories like computers are a 4 percent fee. On top of all this you will have PayPal Fees of 2.9 percent + $0.30.”
So on average you are paying at least 11.9 percent in fees alone. Amazon, on the other hand, charges 15 percent on the sale price. So here we have two widely used models — eBay and Amazon — that charge between 11.9 to 15 percent. Now if you compare this with a truly decentralized peer-to-peer system, we can begin to have a greater understanding of such a liberty provided through blockchain applications. OpenBazaar, a marketplace that has been in development since 2014, allows people to directly deal with one another. It is not a company but rather open-source software:
“OpenBazaar costs nothing to download and use. There are no fees to list items, and no fees when an item is sold. Because the trade is P2P (peer to peer), it’s happening directly between buyers and sellers with no middleman to take a cut from each sale. It’s completely free e-commerce.”
With all this in mind, it does not take much time to understand the impact and benefit this has for both sellers and buyers, that some lines of code — which are open-source for anyone to review — can replace entire organizations and multinational companies which have stood in the way of e-commerce, while charging large sums of fees.
Blockchain Application of the Sharing Economy
OpenBazaar is a grain of sand on a beach which has come to be a blockchain peer-to-peer decentralized world, allowing people to deal with each other directly. It’s a place where software can replace entire companies and their respective industries.
Imagine the same concept applied to Airbnb, Uber and more. Where the individual is empowered and even liberated from existing limitations and fees placed by organizations.
Other examples of such applications include Steemit and soon to be launched NEOS, where people are rewarded for authoring content, sharing, commenting and participating within completely decentralized platforms.
The Future Will Be Decentralized
Advancements in connectivity, technology and applications have taken us from relying on centralized organizations, to a place where people can deal with each other.
In the case of blockchains, this has been achieved by removing the entire organization or roles — as is in the case of insurance or lawyers — and replacing them with software that promotes transparency, integrity and provides a better deal for the users.
In the case of money, we can take control of how we store our hard-earned savings and become our own banks. We can overcome the negative effects and traumas caused by events such as the Global Financial Crisis of 2008.
Living in a world where we are increasingly connected can have its downsides. But with the introduction of peer-to-peer systems we can perhaps open the door to choosing what we share, and with whom we share it. Such a tool has allowed us to transcend beyond needing banks, hotels and cars to a place where we can simply use what we need, when we need it. A place where we can go back to dealing with people on a peer-to-peer basis — something we had been doing for thousands of years.
Hopefully we can see such things spread into all aspects of our daily lives, and especially in parts of the world where the unbanked and those without the benefits we reap in the modern world can also access such liberties through a simple connection. All without having to sacrifice our personal liberties or privacy.
What are your thoughts on decentralization? Please share them in the comments.
Images via Pixabay