The subtitle makes clear that Franceschet is far from a faithful Nakamotoan!
“The Alleged Decentralization of Blockchain Applications”
(From [1], p.45)
Me-ow!
By now, all but the most fundamentalist Nakamotoans must realize that the term “decentralized” (a) means several things and (b) isn’t the magical cure-all some Nakamotoans suggest, and (c) most Web3.0 stuff isn’t really decentralized anyway.
Franceschet actually does understand the idea of “decentralization”, particularly in networked information and organizations. And he’s not interested in parsing arguments about the variations of Nakamotoan blockchain protocols. He’s interested in the kinds of things that “Web3.0” is building on top of blockchains. I.e., the things that people might try to use.
As I have pointed out for years, no normal human deals with blockchains directly. They use applications and services that may use blockchain technology (often invisibly).
Franceschet considers two popular use cases for contemporary blockchain stuff: DeFi and NFTs.
DeFi (“Decentralized Finance”)—so called—is mostly conventional finance implemented with one or another version of Nakamotoan blockchain technology. Key services such as exchanges are, in fact, operated by for profit companies, and use a ton of completely normal, non-blockchain technology (standard internet, servers, and clients). Users trust the company and the service in various ways, generally similar to the trust required to use conventional financial institutions (but without the benefit of most legal regulation).
There are some actual really-DeFi systems that use executable contracts (AKA “smart contracts”) to implement trading and other operations. “In this case, users are forced to trust not a third party but the exchange developers and the smart contracts they wrote” ([1], p. 47)
“Trust” has moved, but not been abolished.
So called Non Fungible Token technology has enabled an explosion of digital art markets. This technology was originally hyped as a great equalizer, allowing artists to sell their work without gatekeepers.
Not surprisingly, normal humans, not to mention creative artists, seldom deal with blockchains per se. The actual marketplaces and digital tools use the same non-blockchain technology as conventional digital services, and, by the way, are generally organized as for-profit companies.
For that matter, the NFT deposited on a blockchain is actually just an sealed certificate of authenticity. The actual artifact and associated metadata are generally managed in conventional (usually centralized) digital systems, or hybrid digital-“analog” systems.
In this case, “trust” has transferred from a corporation to… complex software and a corporation.
In addition, Franceschet notes that the markets built with this supposedly equalizing technology are, in practice highly concentrated. Very highly concentrated. He calculates the equivalent of a GINI coefficient for one blockchain based art exchange to be over .80! NFT “wealth” is absurdly, insanely concentrated.
This is not what you hope to get from a “decentralized” technology. (IMO, it is what you expect from most art markets, however. Technology can’t really change the social psychology of “artistic value”.)
Franceschet notes that blockchain based exchanges and markets do have a decentralized core, and potentially can be used in a peer-to-peer, “trustless” fashion. But people mostly don’t to that.
Basically, normal humans, (“even “nerds,”” he snarks) don’t have the energy to run all the infrastructure necessary to do it yourself, let alone to write code to access blockchains, and so on. “Nerds” especially should be aware of the requirements and responsibilities of operating a network protocol and software stack. The daily bug patches alone can be a full time job!
“[N]ot all individuals have the will, skill, and time to adapt to a truly interdisciplinary field such as blockchain.”
([1], p. 47)
A normal response to a large technical requirement is to delegate. In this case, users delegate to (centralized) companies, servers, and software providers to get all the pieces they need. This is a sensible strategy, but it absolutely requires trust.
And, as we have seen in recent years, trusting off-shore, unregulated, poorly run organizations has serious risks and downsides.
“A dose of delegation and centralization is therefore inevitable. This is not a bad thing, so long as we deeply understand that centralization entails delegation, while decentralization demands responsibility.”
([1], p. 47)
- Massimo Franceschet, Decentraland: The Alleged Decentralization of Blockchain Applications. Communications of the ACM, 66 (6):45–47, 2023. https://doi.org/10.1145/3563942
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