Decentralization to centralization

This morning I was reading an article by Chris Dixon (VC at a16z) at Wired. I wholeheartedly agree with his reasoning. This is my take on it.

The basic internet technologies like HTTP (to run websites), TCP/IP (to let devices communicate between each other) and DNS (to map domain names to a server) are all open. It’s one of the major reasons the internet could grow as big as it did.

Most of the service layer of the internet like servers and routers, run open source software or are mostly built on of open source software. Android and many other devices out there run on Linux which is an open source kernel – the heart of the operating system.

But the application layer where we interact on the internet has gone closed. Platforms like Facebook, Amazon, and Google are all closed. The push for the decentralization stems from this and the excitement around blockchain and crypto is because of the promise to open up these platforms.

The problem with these closed platforms is the arbitrary nature of governing of access to these platforms. I call it arbitrary not because there is no reason for the way they’re governed (mostly to maximize profit), but the effects the governing has on the users of those platforms.

Facebook has changed their strategy around the newsfeed a few times and the fall out among the business users was significant. Take for instance Zynga which went big on social gaming on Facebook and then Facebook decided to deprioritize social gaming in their feeds.

Amazon is battling with their marketplace suppliers on multiple fronts. One of them is the absorption of successful staple items into their AmazonBasics brand taking away market from their own suppliers. Also, they’re battling with fraudulent behavior on their platforms like fake reviews which lead to suspension and withholding of revenue. In turn that got weaponized where vendors leave fake reviews with competitors to push them out of the marketplace.

Google changes their search algorithm all the time. In Europe, they’ve been accused and fined for deprioritizing search results which compete with their own.

Apple has a tendency to do the same by leveraging to their platform to push their own services while making it hard or impossible for competitors to get access. The HomePod only supports Apple Music for now.

The problem is that these large platforms see the innovation happening on the edges of their platform and absorb them into their own business while pushing out existing companies. This makes perfect business sense but it also makes them unreliable business partners.

But most of all, it absolutely kills innovation. Why put effort into building and launching a successful new service when you can predict that in the future the internet giants will take it away. It’s not a premise for success and it’s hard to raise funding for that.

Blockchain and crypto might be a solution. Time will tell. As Chris Dixon writes, “It took twenty years for open source software to supplant proprietary software, and it could take just as long for open services to supplant proprietary services.” Regardless, this problem needs to be solved. Internet regulation is never fundamentally going to solve this problem, it just stems the tide.

The promise of decentralization makes the tech community including myself so excited about blockchain and crypto. It’ll free us from the grasp of these internet giants and let us innovate again.