Decentralization is not a luxury; it is a necessity. In a prescient article in The Atlantic back in 2012, science fiction writer Bruce Sterling referred to the likes of Amazon, Facebook and Google as “The Stacks,” predicting the insidious power grab that has happened in the last decade. As the giant tech companies consume more and more of our lives, the fact that technologies that enable us to push back against them are being developed is not only encouraging: it is essential.
Since Bitcoin (BTC) began the process of decentralizing payments in 2010, we have seen the process of disintermediation at work in many sectors, from decentralized identity and digital asset management to decentralized gaming and prediction markets.
However, there is one sector where — until now — it has been impossible to free ourselves from the grip of monopolistic power: the world of commerce. Registering physical assets on blockchains is something that has been possible for some time, but that alone has not been enough to allow a fully decentralized commerce system to emerge.
Why do we need this so badly? Is it not the case that — as has been proved during the COVID-19 pandemic — the current commerce system, which is run by centralized businesses, already fulfills our needs? We are now accustomed to the idea that we can order something online and have it delivered the next day or even the same day. If there is something wrong with our purchase, we can have reasonable assurance that it will be resolved by the company that has brought buyers and sellers together.
Sometimes it is difficult to conceptualize exactly how the next iteration of a technology will improve our lives, especially if the current one appears to be working adequately. We’ve all heard Henry Ford’s quote about “faster horses,” and it was not until Bitcoin arrived — and later, the decentralized finance ecosystem — that many people began to realize how inefficient and extractive the legacy financial markets are.
It is probable that the emergence of decentralized Web 3.0 networks will be one of the most powerful meta innovations in human history. This technology has the potential not just to increase innovation but to accelerate the rates of technological evolution and economic growth to such a degree that we fundamentally solve the innovation problem. This would trigger a metasystem transition to a post-scarcity, post-capitalist crypto economy of abundance while solving species-threatening negative externalities.
So, what advantage might be offered by a decentralized system for commerce? The truth is that large legacy systems of human activity are the enemies of innovation and progress. Centralization can create bottlenecks and systemic inefficiencies, while top-down management means that many exciting new ideas never make it off the drawing board.
Opening up these areas of enterprise by providing vendors of all sizes with the same tools, data and opportunities that are currently available only to a subset of the largest and most privileged allows for a diversity of products, services and payment rails and for a true “wisdom of crowds” quality of reviews and recommendations that we can barely imagine today. Decentralized value chains are by their nature more efficient because value flows freely in such a system without resources having to be diverted to rent-seeking intermediaries.
If this is the vision, then what are the practical necessities of such a system? A fully functioning decentralized commerce, or “d-commerce,” network should offer automated mechanisms to replace centralized transaction coordination and a Web 3.0-powered data marketplace to replace data hoarding.
In terms of coordinating transactions, existing decentralized systems may eliminate intermediaries and the need to trust third parties, but at a price — by introducing some kind of arbitration, which introduces cost and friction. These costs can mean that transactions under about $100 break the business model because arbitration fees cannot be reduced below a certain threshold. The challenge facing decentralized protocols is how to coordinate commerce between buyers and sellers in a way that decentralizes trust but reduces arbitration, with all its externalities, such that commerce can effectively be automated.
Thanks to innovations in the field, transactions can take place with nonfungible-token vouchers, effectively turning them into futures contracts that minimize the need for human arbitration and provide seamless integration with the rest of the Web 3.0 ecosystem. Imagine a world where you can go to a shop in Decentraland and buy a painting or customized guitar that will be delivered to your door in real life, or where the smallest-scale vendor can compete on a level playing field with even its largest, most established competitors.
Breaking the ties that bind us into existing extractive networks will not be easy, but it is necessary if we are to ensure that decentralization ultimately encompasses the real world in addition to the digital one.
The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Justin Banon is the CEO and co-founder of Boson Protocol, a project using smart contracts to power real-world commerce. Prior to this, Justin spearheaded the Travel Experiences Division of Collinson, where he managed a group of global loyalty rewards platforms including LoungeKey, Mastercard Airport Experiences and Priority Pass. A physics graduate from Imperial College London, Justin also holds a master’s degree in e-business and innovation from Birkbeck College, University of London, and a master’s degree in digital currency from the University of Nicosia.