Wednesday, 29 March 2017

CASE 469 - A decentralized future

Imagine having your car working away, transporting passengers while you’re at work. Imagine having your computer utilizing its spare capacity to serve businesses and people across the globe. Imagine being paid for browsing the web and taking ownership of your, arguably invaluable, attention. Imagine the world like that. That world is not far away. A paradigm shift in the way we view software models is approaching. When Bitcoin, the first cryptocurrency, made us reassess our definition of Store of Value (SoV), it also revealed a sneak peek of the future: a world running on decentralized applications (Dapps). These distributed, resilient, transparent and incentivized applications will prove themselves to the world by remapping the technological landscape. By using the term “decentralization” I refer to a process of redistributing functions, people, powers or things away from a central authority, government or corporate control. The problem with centralized systems is that they lack transparency, allow for single points of failure, censorship, abuse of power and inefficiencies. The fundament of their existence often is missing trust within communities or networks, so they need a trust building intermediary to be organized. Paradigm shifts towards decentralized systems are enabled by new technological breakthroughs (i.e. blockchain, cryptography, consensus mechanisms), a rapidly growing developer community as well as new ways of raising capital. Energy, the way we use, produce and generate it is vastly changing at a rapid speed. We are going from a centralized, slow moving, poorly efficiant, expensive world run on fosil fuels and companies could get away with fraudulent crimes, unregulated systems and high prices. To an efficant energy saving, low carbon world and its only natural the financial world needs to change with it too.

Technological decentralization can be defined as a shift from concentrated to distributed modes of production and consumption of goods and services. Generally, such shifts are accompanied by transformations in technology and different technologies are applied for either system. Technology includes tools, materials, skills, techniques and processes by which goals are accomplished in the public and private spheres. Concepts of decentralization of technology are used throughout all types of technology, including especially information technology and appropriate technology.

Technologies often mentioned as best implemented in a decentralized manner, include: water purification, delivery and waste water disposal, agricultural technology and energy technology. Advancing technology may allow decentralized, privatized and free market solutions for what have been public services, such utilities producing and/or delivering power, water, mail, telecommunications and services like consumer product safety, money and banking, medical licensing and detection and metering technologies for highways, parking, and auto emissions. However, in terms of technology, a clear distinction between fully centralized or decentralized technical solutions is often not possible and therefore finding an optimal degree of centralization difficult from an infrastructure planning perspective.

The Birth of Decentralized Applications

As the concept is still in its infancy, there might not be one definition of what a Dapp is. However, there are noticeable common features of Dapps:

Open Source. Ideally, it should be governed by autonomy and all changes must be decided by the consensus, or a majority, of its users. Its code base should be available for scrutiny.

Decentralized. All records of the application’s operation must be stored on a public and decentralized blockchain to avoid pitfalls of centralization.

Incentivized. Validators of the blockchain should be incentivized by rewarding them accordingly with cryptographic tokens.

Protocol. The application community must agree on a cryptographic algorithm to show proof of value. For example, Bitcoin uses Proof of Work (PoW) and Ethereum is currently using PoW with plans for a hybrid PoW/Proof of Stake (PoS)5 in the future.

If we adhere to the above definition, the first Dapp was in fact Bitcoin itself. Bitcoin is an implemented blockchain solution that arose from problems revolving around centralization and censorship. One can say Bitcoin is a self-sustaining public ledger that allows efficient transactions without intermediaries and centralized authorities.

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