Fostering Decentralization

As I have previously described, most developed countries have large central governments with a high degree of centralized decision-making. That is complemented by a high degree of concentration in the economy, with a few firms dominating most industries. Both of these things are bad for the knowledge loop, as they inhibit experimentation. A recent example of this was illustrated by the response to COVID-19. In the US, testing was largely federally controlled, making it difficult to execute a differentiated state-level response. Even a state the size of California, which on a standalone basis would be the world’s sixth largest economy, was unable to approve rapid tests developed by California-based startups (Haverstock, 2020).

We can take many actions to help foster a return to decentralization. For example, where it is permitted, parents can choose to home school their children with other parents, forming experimental education pods. More importantly, we can participate in the burgeoning field of blockchain technologies. The best known blockchain is Bitcoin, a digital alternative to gold.

Blockchains are decentralized networks that can nonetheless achieve consensus, such as on how many Bitcoin are controlled by which address on the network. This matters because as we saw earlier, much of the power of companies such as Facebook, Google or Amazon comes from network effects. Government power is also derived from a network effect that arises from the ability to issue currency and regulate banking. Building decentralized alternatives to these systems using blockchain technology is a way of removing power from government and large corporations.

As it turns out, when blockchains work properly they are uncensorable. Unless a government or corporation can take over a large percentage of the nodes on a blockchain network, the information maintained by the network will continue to be propagated correctly, even when some nodes are trying to purge or manipulate the contents. The only option governments face is to cut their population off from accessing the networks, and this requires a high degree of control over all Internet traffic (as has been achieved, for example, by China). This is why fighting against national ‘firewalls’ is so important.

While any one new blockchain system has a high likelihood of failing, the large number of current experiments will produce systems that have the potential to be transformative on a global scale. One of the most exciting possibilities is that we may end up with UBI built outside of existing government budgets as part of a cryptocurrency. A variety of projects are currently attempting this, including Circles and the $UBI token.

To be clear, decentralization and blockchains do not represent a panacea. Some problems require centralization to be solved (for instance, water and sewage are centrally controlled for a reason). And decentralization can bring its own problems, such as the potential aggravation of the ‘Cyber-Balkans’ problem that we encountered earlier. But at a time of excessive centralization, it is crucial that we foster decentralization to act as a counterweight.