Roadblocks to a Decentralized Internet

Decentralized Internet is a central theme in HBO’s hit series, Silicon Valley.

One of the great promises of blockchain technology (specifically, Turing complete blockchains such as Ethereum) is the concept of a Decentralized Application (AKA “dApp”) — an Internet service completely owned and operated by computer code with no human owners/operators. The idea of a Decentralized Internet has achieved some level of mainstream interest in the sense that is a central theme of the popular HBO series, Silicon Valley.

This article discusses a few popular critiques of today’s Centralized Applications (which I’ll call “cApps”), how dApps propose to remedy the shortcomings of cApps, and highlight several significant roadblocks which threaten the viability of a mainstream dApp ecosystem.

Today’s cApps are primarily criticized on three solid grounds. First is the fact that cApps have consolidated into Internet behemoths such as Google, Facebook, Twitter, etc.; these centralized capitalist ventures rely on humans (and their biases) to control the content on its platform, with little to no regulatory oversight.

This enables (in fact, requires) Facebook to apply subjective standards to regulate the content on its platform. For example, Facebook does not allow certain content considered “Cruel and Insensitive” or “False News” and cannot (by law) allow certain content, such as that deemed to be related to “Dangerous Individuals and Organizations.” This is flirting with the idea that “free speech gives us the right to offend,” but that’s a separate topic.

It also enables Google to provide personalized search results based on a plethora of data associated with your Google account and cApp browsing history. This means that Google search results are no longer the same for everyone, and is especially true if you are logged into your Google account while browsing.

The second critique of cApps is that these Internet conglomerates extract and sell personal identifying information to third parties without the full knowledge and consent of its users. This is the idea that “You’re the Product, Not the Consumer.”

Facebook, Twitter, Instagram, and even “sharing economy” services such as AirBnB and Uber all rely on its users to produce content for their respective platforms. The value these social media platforms offer their users comes from content produced by other users, not by the host platform. As TechCrunch contributor Tom Goodwin observed, “Uber, the world’s largest taxi company, owns no vehicles. Facebook, the world’s most popular media owner, creates no content. Alibaba, the most valuable retailer, has no inventory. And Airbnb, the world’s largest accommodation provider, owns no real estate. Something interesting is happening.”

Truth be told, the real, underlying consumers of social media platforms are advertisers and data miners — not end-users. Users get free access to these platforms, but only in exchange for producing both content and advertising opportunities. This arrangement enables abuses like Cambridge Analytica.

The third critique of cApps is that they rely on a centralized Internet infrastructure (ISPs) which are vulnerable to the whims of politics and special interests. This results in harmful regulatory actions such as the FCC’s recent decision to repeal Net Neutrality.

Internet censorship and surveillance varies by country. (Source)

Blockchains are effective tools for censorship resistance. With dApps, “code is law” (as was the tagline of the defunct TheDAO project). The idea is that smart contracts are controlled by math, and we can trust the laws of math more than the judgement of humans. Thus, a Decentralized Facebook would not need a 10,000 person “content review team.” to determine which content is appropriate for its platform; it would publish all posts from all users with no filter.

dApps require users to completely own and control their own data. This has mixed implications, which I address later. However, Governments are starting to catch up with consumer’s privacy demands and are beginning to enforce consumer data controls with regulations such as GDPR.

Lastly, whether or not Ethereum dApps would be affected by Net Neutrality is still very much up for debate. Time will tell.

Despite the hype, there are serious roadblocks which threaten the viability of a healthy, mainstream Decentralized Internet.

One of the biggest issues is fairness. There already is an elite class of technocrats; current blockchain participants (digital asset holders) own 100% of the economic and utility token supply and will therefore have the most control and influence over the design and governance of a Decentralized Internet and the dApps built on it. This is especially true if the new decentralized Google/Facebook/Twitter/etc. adopt Proof of Stake as its consensus mechanism.

Then there is the governance issue. Governance requires humans; designing, building, and maintaining dApps will require at least some human input, which creates a risk of centralization.

Related to this is the difficulty in achieving near-perfect consensus for all dApp upgrades. A Decentralized Internet requires a near-perfect majority consensus on decisions affecting dApp development and maintenance. In order for a decentralized Facebook to stand a chance against its centralized counterpart, there can never be a chain split. Getting users to agree on the design and function of an app is extremely difficult, as Snapchat recently realized.

Identity and reputation are incredibly difficult challenges for dApps. A Decentralized Internet requires “tokenized identity” — the ability to encode/associate your online and/or real-world identity with a hash output on a Blockchain. The problem is that identity and reputation are by their nature very mutable — people change addresses, names, careers, marital statuses, die, etc. Thus, maintaining a blockchain record which is truly reflective of your online/real-world identity status requires a centralized data oracle, which again creates a risk of centralization.

The human lifecycle is naturally mutable.

There are pragmatic problems with how dApps actually work. Every state change in a dApp is an on-chain transaction which costs time and money. For example, users of centralized exchanges are able to create, modify, and delete market orders instantly and freely, thanks to centralized databases. The same is not true for decentralized exchanges, where each order creation, modification and deletion requires the user to send a transaction to the blockchain in order to update the state of the ledger and execute the command. An interesting side effect of this technical inefficiency is that it renders high-frequency trading cost-prohibitive on decentralized exchanges.

Lastly, dApps require users to create, own, and manage their own private keys. Unfortunately, this requirement would exclude a significant population of today’s Internet users (nontechnical, young, elderly, disabled) who may be unable to effectively control this vital piece of data.

Private key management is not for everyone.

I do not intend to suggest that blockchain development is not a worthwhile pursuit; it is, and scaling solutions as well as other important innovations will likely emerge in the process. When the dust settles, it is unlikely that we will see Google, Facebook, Twitter, etc. dissolve their corporate entities and surrender to the New Decentralized Overlords. Instead, they will likely integrate elements of their applications on the blockchain where it makes the most economic sense to do so.

That would be a boring outcome and I’d love to be proven wrong.


Bitcoin Compliance Professional