Why Decentralization Isn't as Important as You Think

As a crypto VC, I often hear from projects that claim they’re going to be “X, but decentralized.” Usually, this is the telltale sign of a bad pitch.

I agree with Jesse Walden on this point: projects ought to progressively decentralize as they figure out product market fit—that is, once they figure out what’s actually valuable to build. But for most everything in this space, product market fit is still a long way away. Until then, I think we can obsess a little less about being perfectly decentr... See more

Satoshi made Bitcoin decentralized to solve a specific problem: that previous forms of Internet money kept getting shut down. A decentralized form of money is resilient to insolvency, attack, or censorship. But decentralization wasn’t itself the point. It was just a means to an end. The point was to make a form of Internet money that worked!

I believe this story, this decentralization fairy tale, is predicated on an error. It’s the same error that underlies most utopian projects.

Decentralization is valuable when it lets you do new things fundamentally better, not old things fundamentally worse. Web3 advocates are trying to pick a fight with the most beloved products in the world while handicapping themselves with decentralized architectures. If you want to win a fist fight, you probably shouldn’t choose the strongest guy i... See more

To Satoshi, decentralization was valuable insofar as it mitigated some other fundamental risk: censorship, platform security, corruption, etc. It’s the properties decentralization gives us that we care about, not decentralization itself.

Fine! Go build a better Internet by yourself in your own personal Mastodon server. But that’s not enough for you—you want the world to join you. And rightly so! If you want that, you need to compete for the world’s attention, and you must compete on the merits. Decentralization in this context is not an advantage; it is a handicap. So be it. You ca... See more

Risk is a multidimensional vector. Decentralization mitigates some risks, but not others. I guarantee you that developers today are more comfortable building on what’s left of Twitter’s APIs than they are building on top of public blockchains. Twitter has 38M accounts regularly using their APIs, while total Dapp users are still well below 1M.