The quest for true decentralization: why aligning interests early is key to unlocking Blockchain’s potential

Blockchain is one of them most disruptive technologies of the last two decades, through several hype cycles before the metaverse and AI took center stage. Powering cryptocurrency, NFTs, DeFi and web3, blockchain promised to usher in a new era of decentralization. However, a closer look at how most blockchain projects operate under the hood inevitably suggests that such decentralization has yet to become a reality.

Decentralization has always been at the center of the blockchain movement, which promises that it is the key to ending the need for central governments and middlemen. However, it is important to note that “decentralized” projects existed long before blockchain, especially through P2P protocols and projects such as Gnutella (2000), The Pirate Bay (2003), and BitTorrent (2001). It was this type of protocol that would popularize the term “peer-to-peer”, which Satoshi Nakamoto would later use to introduce Bitcoin through his 2008 whitepaper.

While the history of decentralized protocols is complex and their individual journeys differ between them, there are some similarities. These range from emerging as a response to authority to their heavy reliance on activism. One of the more paradoxical similarities, however, is their reliance on centralized services.

A prime example of the need for such services is The Pirate Bay, which often refers to itself as “the galaxy’s most resilient BitTorrent site.” After two decades of existence, the site has become synonymous with P2P piracy, facing several removal attempt of law enforcement i cooperation with organisations such as the Alliance for Creativity and Entertainment (ACE). But while it is decentralization that enables TPB and similar projects to remain active, the team has relied on centralized tools, technologies and strategies to remain operational.

It is possible to argue that many blockchain projects do not resemble The Pirate Bay, but closer to protocols such as BitTorrent. This is something Vitalik Buterin has pointed out when he has talked about it DAOs and censorship resistance. However, this opens a new can of worms, moving the discussion to the topic of governance and development.

The risks of incorrect governance models are ones that blockchain entrepreneurs, developers and analysts know very well. Most blockchain projects rely on governance models such as DAOs in an attempt to give all users equal say in the decision-making process. Unfortunately, as a means of ensuring that those participating in governance have the project’s best interests in mind, this decision-making process is often tied to token holding volume, resulting in whales being given unrivaled power.

DeFi researcher Thor Hartvigsen found back in February that some of the most popular DeFi protocols already is or will be controlled of whales in the near future. Other experts such as Blockstream’s former Chief Strategy Officer Samson Mow have also pointed out that the ability of certain entities to change DeFi protocols disproves their claims of decentralization. Whether it’s whales dominating a DeFi protocol or individuals taking measures against whalesthe need to balance the interests of all parties without compromising decentralization is clear.

The Block’s Editor-at-Large Frank Chaparro put together with Souq’s co-founder and CEO JonPaul VegaPrincipal of Framework Ventures Brandon Pottsand Parallels co-founder and head of game design Kohji Nagata, to talk about “Comparing Stakeholders and Protocol Interests.” The panel, which was part of this year’s edition of Grit Daily House on Consensus, touched on topics ranging from how to identify quality stakeholders to what proper decentralization looks like.

To learn more about how blockchain projects can become more decentralized by aiming to align their own interests and those of their stakeholders from the start, be sure to watch the panel on Grit Daily’s official YouTube channel or the video below.