Blog post

Exterminating central power with blockchain is an illusion

By Fabio Chesini | November 18, 2018 | 3 Comments

The attraction of public blockchain ecosystems lies in the promise of decentralisation and disintermediation — a sort of utopia where we can all conduct digital interactions without the involvement of corporations or government agencies.

This vision has driven a spectacular amount of investment in this space, with initiatives including cryptocurrencies, initial coin offerings (ICOs) and decentralised computing platforms like Ethereum.

The idea behind bitcoin — the first digital cryptocurrency — was to create an electronic payment system by using a cryptographic proof mechanism for building trust. In other words, it was designed to replace third parties, like financial institutions, in facilitating specific social interactions for exchanging value, with a new autonomous digital structure known as the Bitcoin blockchain.

Social interactions, however, are more complex than just value exchange. They’re far from being replaced by algorithms. It doesn’t matter how much technology we use to enable unattended or automated digital connections, or how much we push the boundaries of decentralisation.

Despite overwhelming hype, public blockchains won’t eliminate central authorities. Humans need selfish, controlled and regulated social interactions to fulfil their basic needs for survival. They’ll always want and need to be in the loop to control or have a sense of control over the power delegated to a third party. Public blockchains can’t perform this complex function.

If we compare public blockchains to another autonomous digital structure, the internet certainly revolutionised communications and data exchange, and brought the idea of disintermediation. The reality is that new central powerhouses emerged to accrue even more power and control.

A public blockchain has a complex mechanism, one that empowers different actors — including developers, miners, validators and users — by segregating and interconnecting their duties. These actors are the new central authorities, with their own selfish interests, working together for a common purpose.

When we use a public blockchain, we’re entering into a trustless uncontrolled relationship. Once we begin a transaction, we rely on the autonomous digital structure (the public blockchain) behaving the way it should behave. We’re abandoning control of the actions performed by the public blockchain. There are no legally binding laws governing rights and obligations that can be enforced by a central authority.

The governance models of public blockchains are far from being perfectly decentralised. Complex social interactions for gaining consensus are a long way from being replaced by algorithms. There are novel ideas for managing these complex social interactions within autonomous structures, such as EOS Blockchain, Tezos or DFINITY, for example.

In the near future, we might be able to trade value and delegate many activities by relaying in autonomous digital structures like public blockchains. But no matter how we use them, we’ll always need regulated social interactions enforced by laws to make people accountable for having a sense of control.

Both regulated and nonregulated interactions are at the cornerstone of social interactions and deeply interrelated with the fulfilment of selfish basic human needs. It’s a utopian dream to think there can be a society regulated only by trustless pseudoanarchic systems. In other words, abandoning our control of future actions is intimately linked — in ways that are sometimes not obvious to see — to our primitive selfish instinct behaviour for survival.

As a society, we’re certainly going to take advantage of public blockchains, just as we have the internet. They can be used as a new frictionless mechanism for value exchange, for notarisation such as events certification, or even for running specific trustless services such as decentralised exchanges. But in the end, we’ll always need to make sure we’re in control when conducting business.

Social interactions are complex and regulated by public laws. We’re far from replacing those laws with digital cryptographic algorithms. Central authorities are needed to enforce regulated interactions, and they won’t go away anytime soon.

Society has shown that it can live with the internet, despite all the controversies about its governance model. The same will prove to be true of public blockchains and cryptocurrencies.

For more information and recommendations on these ideas you can start with the Gartner report on “Maverick* Research: Blockchain and the illusion of exterminating central power [1]” which was published in September 2018.
[1] Full report is available to Gartner subscribers.

My viewpoint contradicts the conventional wisdom that centralised business models are under threat of extinction due to public blockchains. I believe this is an illusion and that, at most, business models will face a shift in power to the next generation of digital central powers –from monolithic to more fragmented atomic central authorities.

The Gartner Blog Network provides an opportunity for Gartner analysts to test ideas and move research forward. Because the content posted by Gartner analysts on this site does not undergo our standard editorial review, all comments or opinions expressed hereunder are those of the individual contributors and do not represent the views of Gartner, Inc. or its management.

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  • Leif Horton says:

    Well written and well thought out article.i’m glad you mentioned EOS as that is the blockchain we are building on. Keep up the good work, I will pass this to colleagues that are a bit more cerebral that me.
    Sincerly ,leif

  • Dan Conway says:

    I’d be more persuaded if you used examples, data and facts rather than just a bunch of opinions strung together. You don’t get smart person credit for simply being a contrarian — especially when the conventional wisdom among most people on the planet is exactly what you have strung together here.

    I’m on the fence about the ultimate benefits of decentralization. Looking for thoughtful content and perspectives. This isn’t it.

    • Fabio Chesini says:

      Hi Dan,
      This research was done in 2017, by that time this was not conventional wisdom. Data and facts are part of the research note, this is just an extract. In my opinion the ultimate benefit of decentralization (currently only possible with pseudo anarchic digital structures) is to bring the necesary power rebalance for a hyperconected digital society. This is already happeing by the redefinition of what’s value means.