During a recent session at Davos, Gavin Wood, founder of blockchain company Parity Technologies, discussed web3 and decentralization. Asked to define decentralization, referring to what some call “political decentralization,” he said, “It’s reducing the amount of power over a system that any one individual economic actor has.” Wood went on to point out that most political and corporate structures utilize hierarchical structures.
In hierarchical organizations or governments, one or a few have executive power, with decisions being made centrally by a few key players. There’s less decision-making power in each subsequent layer of the hierarchy, so at the bottom, essentially, there’s virtually no decision-making power.
Web3 decentralization means removing this power structure. We replace it with a participative, organic system with a different set of checks and balances, with distributed (instead of centralized) control. Take Polkadot as an example. The chain is fully self-governed. The chain discusses, votes, and executes any decisions about how the chain works. Continuing the example: For Polkadot to change how the blockchain operates, the process would look like this:
- A group of people works on a proposal that can come from anyone in the ecosystem. Developers, users — anyone with a stake in Polkadot can make such a proposal. They’re required to articulate the problem, the solution, and associated costs, just like any business proposal.
- The proposal is made on the chain and available for discussion and debate — fully transparent and visible to all.
- An accepted proposal can transform into a prepared referendum. Often the proposals are modified by the collective’s feedback, then submitted as a final recommendation.
- Voting rights for the referendum are available for anyone with Polkadot coins (DOT). There is further discussion and debate.
- There’s a vote for the referendum.
- If successful, the proposal is executed, whether it’s new code or investment provided to the proposer to complete the works.
- A record of the proposal, the referendum, and voting are perpetually visible and auditable by anyone.
Let’s flip the scenario and consider what would happen in a large company:
- If a junior employee has an idea, they’re generally required to socialize with their team, manager, and possibly higher levels of management first.
- If senior leadership is interested, then approval to spend time on a proposal might be granted.
- Once created, the team and team manager review the proposal, often with edits.
- The team manager would present this to their leadership for an investment decision or further review by a more senior leader.
- This process can be relatively smooth or arduous depending on the hierarchy, with the final decision resting with leadership regardless.
- The decision would then be handed back down to the team for execution.
- The decision-making process, in this case, is primarily obfuscated and stored in documents that may or may not be accessible to all involved, let alone others in the organization who may be interested.
With the decentralization of technologies, we can create large-scale consensus incredibly fast, powered by blockchain. Another thing to bear in mind is that corporations’ decisions are proposed and made to benefit the corporation directly. A decision made by a digital community will benefit the community at large.
Lacking transparency and collaborative governance within organization structures
The very core of thinking behind blockchain and decentralization speaks to the removal of power held by a select few. With so much decision-making power in the hands of so few, the systems are easily corrupted by special interests, whether this in government or large corporations. Contrastingly, governance that’s transparent to all would represent a dramatic shift from current models. A noteworthy and successful example of decentralization and digital democracy is what’s been happening in Taiwan. Perhaps we’ll talk about the notable online collaboration with its citizens in our next article.
