On Decentralization, BMW's PartsChain and Taiwan's Democracy

Off the Blocks | Vol 108, March 31, 2020

The COVID-19 pandemic is creating a lot of turbulence worldwide and is bigger than anything that I can think about. Most industries are shutting down and companies will see a sharp fall in their business as both supply and demand are disrupted. I am taking this time to help startups tide over the challenges. Join our ecosystem, Velocity, and let us know about your top challenges. Our network remains strong and with access to 25+ countries, we are in a unique position to create collaborations and unlock value in these turbulent times. Interesting things are still happening, and resilient entrepreneurs will come out stronger on the other side.

Why Decentralization Isn’t as Important as You Think

The below first appeared on Unchained, March 31, 2020.

In this essay, Haseeb Qureshi of Dragonfly Capital explains why he thinks the focus on decentralization can be overhyped. What caught my attention is this nugget that we have seen play out repeatedly in DeFi projects:

… for most everything in this space, product market fit is still a long way away. Until then, I think we can obsess a little less about being perfectly decentralized. Our focus should be on innovating and building better infrastructure for the digital economy. 

Here is the intro, but head on over to Unchained for the full context.

If you’ve spent any time at all on crypto Twitter, you’re familiar with the web3 narrative. It goes like this: in the beginning, the web was “truly decentralized.” Against all odds, the World Wide Web won against the corporatist designs of companies like Microsoft, and cyberspace became the territory of hobbyists and hackers. The Internet was henceforth enshrined as a neutral platform. And any publisher, no matter how small or powerless, was free to set up shop in their own corner of the Web. 

But eventually, this decentralized Eden fell from grace. Or so the story goes. 

Now in Web 2.0, 93% of searches happen through Google, 64% of browsers use Chrome, and 79% of social advertising dollars go to Facebook. A handful of companies now effectively control cyberspace.

Web3 advocates see public blockchains as the catalyst to reverse this trend. They want to put power back into the hands of users and replace Google and Facebook with open platforms—perhaps platforms that are owned collectively by their users, operated as public commons.

Some version of this story has been sold to The EconomistWSJGartner, and pretty much all of the tech press.

I believe this story, this decentralization fairy tale, is predicated on an error. It’s the same error that underlies most utopian projects.

Let me ask you this: why did Satoshi choose to make Bitcoin decentralized?

Actually, it’s a trick question. Satoshi didn’t have a choice. Bitcoin had to be decentralized, or else it wouldn’t have worked. Before Bitcoin, every previous attempt to create Internet-native money either went bankrupt or was forcibly shut down by the government (see DigiCashE-gold, or Liberty Reserve).

So Satoshi made Bitcoin decentralized. He made it use proof-of-work mining to achieve permissionless consensus. He built in a P2P networking model so the network would be decentralized. And, eventually, he disappeared from the project entirely, so it would have no ostensible leader. He did this so Bitcoin could survive and have a chance of fulfilling his vision of permissioness decentralized money.

So here we are today. Bitcoin is a $100B+ currency, and it has spawned a renaissance of hundreds of cryptonetworks, all trying to innovate in digital finance. And now, invoking the spirit of Satoshi, they all argue and bicker about which of them are the most decentralized. 

“Look how centralized your mining pools are!” 

“You’re one to talk with your block size, you shitcoiner.”

“Well we have no pre-mine so we’re the real decentralized ones.”

What’s going on here? Why are they doing this?

In this article, I want to suggest: maybe we should stop worrying so much about decentralization. I know this is possibly the least popular position I could take in crypto, but before you reach for your pitchfork, hear me out. I think by the end of this piece, you’ll understand where I’m coming from. (And hopefully elect not to make me a human sacrifice.)

Hear the podcast or read the full transcript at Unchained. It is a fascinating read!

Now some significant news from the world this week:

  1. Gaming | Forte Taps 5 Partners as ‘Blockchain By Itself Isn’t Enough’: Amid the increasing adoption of blockchain technology in the gaming industry, some of the world’s biggest game developers like South Korean Netmarble are partnering with blockchain gaming startup Forte Labs to streamline blockchain-powered game experiences. Forte, a known partner of major cryptocurrency firm Ripple, has just tapped five new high-profile gaming companies in line with its mission to provide best-in-class gaming experiences based on blockchain technology. Forte’s new game developers include United States-based Hi-Rez Studios and nWay, Canadian social games provider Magmic, German gaming firm DECA Games and Netmarble. The newly announced partners follow their previously joined collaborators, including Disruptor Beam, Other Ocean and Kongregate. [… Read More on Cointelegraph]

  2. Media | Block.one Invests $150M Into its Blockchain Social Media Network Voice: Blockchain startup Block.one today announced it has invested $150 million into its blockchain-powered social media network Voice. Launched in 2019, Voice was pitched as a blockchain-based social media application designed with users of the platform in mind. Said to be a “more transparent social media platform for the world,” the service is currently available only in the U.S. in closed beta testing. The service itself is more Twitter in its presentation than Facebook but with the added ability for users to be rewarded for their content through the Voice Token cryptocurrency. Users verified in Voice obtain the tokens daily based on their participation but at the moment the tokens have no monetary value. Any tokens earned during the beta test will be reset once the service launches with users said to be able to convert them to money. [… Read More on Silicon Angle]

  3. Automotive: BMW’s Blockchain Solution for Supply Chain to Roll Out in 2020: The BMW Group is using innovative digital technologies to optimize its processes. A good example of this is Blockchain, a technology that enables tamper-proof data sharing, with potential applications throughout the entire automotive value chain. The BMW Group is using this technology in purchasing to ensure the traceability of components and raw materials in multi-stage international supply chains. Up until now, it has been customary for the many partners to manage their own data separately. The companies’ respective IT systems have not always been able to communicate consistently with one another. For the BMW Group’s purchasing experts and its suppliers, ensuring transparency therefore involved considerable manual effort. [… Read More on BMW]

    In 2019, we conducted a successful pilot project for purchasing front lights. This year, we want to expand the project to a large number of other suppliers.

    - Andreas Wendt, a member of the Board of Management of BMW AG

  4. Finance | HSBC Puts $10B of Private Placements on R3’s Corda Blockchain: HSBC has put $10 billion of paper-based private placement records on R3’s Corda blockchain and plans to ramp up the project through this year and next. With no immediate plans to move into the crypto space, HSBC is focused on assets that have yet to be digitized as well as exchange-based security tokens and traditional assets that could be fractionalized. The bank is also seeing demand from clients to use tokens for a whole fund lifecycle, Roddy said, as well as tokens that are a basket of assets wrapped into one. Unlike other enterprise efforts, HSBC did not put a cost-savings estimate on the digitization project, claiming “incremental internal efficiency” instead. The bank’s main aim with Corda is to get real-time information access. [… Read More on Coindesk]

  5. India | Indian Tech Giant Mahindra Speeds Up Cross Border Transactions with Blockchain: Tech Mahindra, the IT subsidiary of Indian conglomerate Mahindra Group, has become the first Indian business to use R3’s blockchain-based Marco Polo Network for conducting cross-border transactions. It said the platform had resulted in faster reconciliation and ambiguity resolution, as well as a significant reduction of paperwork and time required for the entire transaction cycle. Tech Mahindra partnered with Singapore’s DBS Bank, which facilitated the transactions and acted as the company’s leading trade bank. The parties used the Marco Polo Receivables Discounting product which is designed to help companies optimize their working capital, improve liquidity and mitigate credit risk. Marco Polo is a consortium of major global financial and banking institutions that aims to streamline international trade. The network is built on R3’s open-source blockchain platform Corda. [… Read More on CoinTelegraph]

The Final Word | Taiwan’s Digital Minister Says Blockchain is a Top Priority

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Taiwan is still figuring out how to “do” democracy. Its democratic era only started after the country came out of martial law in the 90s—its first election was in 1996—making its constitution one of the first written in the Internet era.

In many other parts of the world, democracy is part of their culture, part of their tradition. To change it, you have to learn about hundreds of years of proud republican tradition. But in Taiwan, the people who designed the democracy systems are all still around and very active.

- Audrey Tand, Taiwan’s Digital Minister

Tang, the 38-year-old radical who’s leading Taiwan’s drive for technological innovation in governance, said that researching how blockchain can improve governance is a “top priority”. “Ledgers”—Tang prefers the term to blockchain—“are very promising. [They are] a cheap way to build accountability and some sort of legitimacy across sectors,” she said, which makes them particularly useful for governance. Tang’s looking at ways to use technology to facilitate discourse that’s aimed at driving consensus rather than division, part of what she calls “listening at scale”. [… Read More on Decrypt]

About Proteum
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