[Opinion] Striking the Right Balance – Is Some Centralisation the Key?

Meeting a blockchain enthusiast can sometimes feel a little surreal. I say that because I see many striking resemblances to my religious friends that gently try to nudge me towards accepting their faith – especially when it comes to the concept of decentralisation.

“Did you know decentralisation may be the key to solving the problem of voter fraud?" "Did you know that decentralisation can potentially solve world hunger?”

They don't explicitly say it, but it almost feels as if to them, decentralisation is the magic bullet to fix all the world's issues. Can it?

If you meet with some of the key builders in the space, this fanatical belief is even more apparent. From DAOs to DeFi, almost all of these projects place a heavy emphasis on decentralisation. Power to the people, they say.

Look, before I get mobbed by the blockfans, I have to say I get it - relinquishing power to the people is without a doubt a very interesting idea. People generally tend to look out for themselves – and this more often than not leads to good outcomes. (see Adam Smith's Invisible Hand)

But then again it doesn't take much to see decentralisation's dark side. Consider the origins of Boaty McBoatface – a byproduct of the (largely) decentralised internet. Accordingly, the man (@JamesHand) who threw in the name, the result of the online poll is "the reason we can't have nice things."

My two cents – it's not that decentralisation isn't helpful. It's that when decentralisation becomes a key selling point rather than being just a feature in today's blockchain products that makes this trend a little worrying.

Naturally, not all of blockchain is embroiled in this fad. We've seen a few projects take on a semi-centralised approach to this space. These projects have allowed key elements, such as the ownership of assets, to be decentralised, while adopting a more top-down approach when it comes to things like balance, project direction, and sustainability.

Truth is, decentralised blockchain projects regularly face significant challenges, including inefficient resource allocation, high transaction costs, and limited scalability. On the other hand, centralisation can provide several benefits for blockchain projects from an economic perspective, including efficient resource allocation, reduced transaction costs, and greater scalability.

Utility in Centralisation
We don't have to look too far beyond the blockchain industry to see some benefits to small degrees of centralization.

For instance, while Bitcoin is a decentralized system, it's infamously centralised in its mining process. Large mining pools control significant portions of the Bitcoin network's hash rate. While drawing the ire of many blockchain fanatics (SATOsHI WoUlD not APPRObE), it's undeniable that this centralisation has allowed for greater scalability and transaction throughput, while still retaining the system's decentralised nature.

And if we were to widen our lenses a little and see how small pockets of centralisation have helped societal progress, we can turn to the success of DeFi's archnemesis - centralised banks.

We all know how inefficient such banks can be, yet there is no denying how they have played a crucial role in stabilising economies and ensuring financial security for a large part of human history. Central banks have been responsible for setting monetary policy, regulating banks, and managing money supply. They have, to some extent, created modern standards for how we view, manage, and understand money – and these standards are important because; how else can we share a common method to measure and evaluate finance?

Ironically it's the absence of such universal standards that have made blockchain an indecipherable mess to the layperson.

Perhaps it's time to re-think that no-no word, "centralisation". Sometimes it's necessary to count on the vision of one captain leading the ship to its intended destination.

I for one hate to be on a ship piloted by all members of the crew, deckhands included.