Will Regulation Destroy Decentralisation?
In 2009, blockchain technology was first introduced to the world. Along with the invention of Bitcoin, a so-called cryptocurrency which is designed to facilitate an entirely peer-to-peer electronic monetary and payment system. This is the first experiment to transfer digital tokens securely to be used as money between buyers and seller within the Bitcoin network without a need for an official or âgovernment-sponsored notarising authorityâ.
A traditional financial system has trusted third parties like banks which are given the tasks to prevent abuse or fraud. In the end, electronic cash is basically just data and so anyone can make themselves richer by cheating the system and adding zeros at the end of their account balance. With Bitcoin, balances are confirmed by users on a consensus mechanism which is regulated by a computer rather than a trusted financial organisation.
This is what is known a decentralised model.
Cryptocurrencies are separable from blockchain and can authenticate any form of virtual data and decentralise any kind of given task. This includes supply chain management to land registration. If you compare this to regulated systems, they might provide better cybersecurity and deliver savings but they may also offer a new way to prevent concentrations of power.
Adding to this, PIIE has said:
âSocial media provides a good illustration of why this technology could succeed. Today, consumers unload vast amounts of information to corporations such as Facebook and Twitter, including personal characteristics and preferences, connections to others, photos, videos, etc. Recent laws and regulations, such as the EU General Data Protection Regulation (GDPR) and the California Consumer Privacy Act, grant users a measure of control over who gets to see and analyze their data.â
Given the advantages of all of this, a question still remains. Why hasnât this technology spread throughout the world already? And why are dApps still few and far between?
One of the answers to this is the scalability and technical limits and lack of awareness for the technology. But even though these are important, government issues are the big player in this.
âDecentralized models for data validation work a lot like markets: They achieve their intended aims only provided that no participant has a strong dominant position.â
What are your thoughts? Let us know what you think down in the comments below!