The Dark Side of Decentralization: Polarization, Anarchy, and the Scarcity of Public Goods

This article reflects on the phenomenon of the hype around web3. By imagining an extremely decentralized society, the author points out that in terms of media and communication, government and social order, and so on, absolute decentralization will lead to more serious community divisions, government incompetence, economic collapse, and even social unrest and the threat of war. The author predicts that the future society will eventually be only slightly more decentralized than it is today.

As an investor deep into web3, I’m certainly both very bullish and excited about its enormous potential. But in a way, it seems like we early practitioners just jumped in blindly, selectively looking only at the positives of web3 and decentralization without critically analyzing the negatives. This is scary and dangerous.

I mean: I understand that we are currently at a social, cultural and technological inflection point. Countless things have exhausted everyone: political polarization, Covid-19, global warming, job burnout, inflation and the looming third world war, to name a few. We’re fed up with the status quo and eager to embrace the new, so we’re all-in on web3 and the autonomous, anti-establishment movement it represents.

However, we are largely seduced by the false pretence that “web3 can fix web2 and all the problems of the world”. It is overly optimistic and at the same time wrong. Because some of the most maligned things in web2 might be outdone in web3… However, no one’s really talking about that.

As entrepreneurs and investors in web3, we have a moral responsibility to be critical of the future we are building and funding. So I have some initial Black Mirror thoughts on this topic, which I hope will spark more conversations about how we should address the challenges we will inevitably encounter in the future.

Let’s draw a spectrum of centralization from the social, political, economic, and technological levels.

At one end of the spectrum is the purest form of centralization: a dictatorial society and a private marketplace built with web2 technologies. Web2 technology has given three or two big tech companies a dominance because their data-driven engines have built huge moats around them, eliminating nearly all competition. Power is concentrated in the hands of only a few players.

On the other end of the spectrum is the most extreme form of decentralization: a society that operates on liberal principles, a private marketplace powered by web3 technologies. Web3 allows many companies (in the form of DAOs) to coexist, but the crowded environment makes it difficult for them to scale. Power is distributed among many participants.

Today, society as a whole is more centralized. We have central governments and central banks, and most people live in democracies (rather than authoritarian or liberal); web2 technologies have given some of the big tech companies enormous power and ownership to dictate private markets and our increasingly digital lives. In the future, the entire society may become more decentralized, as web3 technology enables new decentralized organizations to form and operate effectively. By limiting the influence of tech giants and creating market opportunities for new entrants, this shift will improve the competitive environment to some extent.

Now, to illustrate the possible dystopian side effects of this decentralization shift, let’s imagine an extreme scenario in which our world would become completely decentralized, running entirely in web3:

Media and Communication

Over the past few years, we have seen the data-driven economy in the web2 make tech giants prosper, while also causing social polarization and causing significant damage. According to researchers at Princeton University, “Social networks don’t just reflect polarization — they influence it.” Personalized, targeted content over time allows people to self-reinforce their beliefs , and become isolated. This has created an echo chamber effect and extremist groups that deeply divide our society.

In the extreme web3 world we imagine, decentralization will lead to greater polarization. People will fragment into many different decentralized communities, creating more divisions and extremist groups. The echo chamber effect will be further exacerbated in these communities, as each community speaks for itself and trusts only its own niche news sources. We may come to a situation where the central media that conveys information to the public no longer exists, and only niche news media are left to reinforce the beliefs of niche decentralized communities. This could lead to war between numerous ideological groups, rather than a potential civil war between the left and the right.

Globally, we will become more closed, less open to new ideas, and less willing to work together. We become ignorant and ignorant, lack empathy for those outside our own inner circle, and cut ourselves off from opportunities to benefit society as a whole. We will no longer be able to educate and mobilize people to act on critical efforts such as saving the planet. We will experience a reversal of idea sharing, innovation and globalization. Ultimately, the outcome will be worse for everyone.

government and social order

Given the damage done by decentralized media and communication, society could sink into anarchy. Governments may lose their ability to effectively communicate policies, goals and influence to voters. Popular ignorance, dissatisfaction, and the combined sense of helplessness that comes from the perception that they cannot control or improve their lives can prompt people to rise up – as seen in the riots of January 6. 2021 attack on the U.S. Capitol).

Some conclusions from Princeton University’s research on political polarization:

  • “The complex systems perspective suggests that the loss of diversity associated with polarization gradually diminishes cooperation, and society’s ability to provide the public goods that contribute to a healthy society […].”
  • “As social interaction and personal will segregate people into stubborn camps, the political system becomes incapable of addressing a range of problems and developing solutions – all necessary for government to function and deliver critical services to society. “

National discontent, combined with potentially weak or volatile financial markets, could be disastrous. For the past 100 years, the economy has been the top concern of voters in U.S. presidential elections. While the U.S. government may continue to run its central bank, if people choose to hold most of their wealth in cryptocurrencies, our government and its constituents may lose not only economic control, but also political control and social order. A real landslide effect.

in conclusion

Well, I know what I’m talking about is dark! To clarify, I don’t think the world will become fully decentralized. This is an extreme example to illustrate my point. Realistically, we may be somewhere on the spectrum of centralization a little bit more decentralized than we are today. However, I hope this example will inspire new ideas and actions that will allow us to shape the future and make it better than the status quo we are trying to disrupt.

One last thought – centralization isn’t all bad. Some degree of centralization and web2 is necessary for society to function and to improve the general quality of life. Web2 and web3 should not contradict each other; they need to coexist and complement each other.

All in all I think in a slightly more decentralized society we would all be great. I will continue to invest in web3, but look at its opportunities and threats with a socially conscious mindset.

Posted by:CoinYuppie,Reprinted with attribution to:
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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