I have long been considering detailing my thoughts on the phenomenon of decentralization, however, the topic is too broad to fit into a single article, even a longread, and it does not yet fit into a specific structure in my mind that would make writing a book about it meaningful. So, I intend to gradually publish a series of posts, which are unlikely to be connected by a single narrative thread. I don’t know how many posts there will be, or if I will realize at some point that the topic has been sufficiently covered, or if I will simply abandon it over time. The posts will be numbered purely chronologically, and if the material ever becomes the basis for a book, the order of arguments may change. Alright, enough with the disclaimers, let’s begin.
Libertarians have their fetishes. Since individual interests are by default always more important than group interests for them, all else being equal, they will always prefer decentralized structures and mechanisms. It is more or less clear how this works in the sphere of coordinating efforts: if there is a task important enough for the community members, they will somehow manage to solve it together, although they will argue during the process about who does what and in what order. However, they usually find it easier to agree on such things than to appoint a leader who will direct the efforts of others.
But this applies primarily to short-term projects, where, having jointly solved a task, people return to their own affairs. As soon as it comes to infrastructural issues requiring constant effort, such momentary agreements begin to work poorly. As a result, private initiative comes to the fore, where the issue is handled by the person who needs it most, or by the person who expects to monetize the benefit they thereby provide to others.
Whether a centralized or decentralized solution is more profitable is largely determined by economies of scale, which can be either positive or negative. In this context, digital infrastructure, rather than physical, is most interesting, because there the negative economies of scale are quite small, while the positive ones are very large. As a result, a business based on providing a certain digital platform will expand until it digests the entire available client base. The limits of expansion will be determined mainly by competitive pressure. In addition to increasing the number of clients, the platform will strive to derive maximum benefit from each client. To achieve this, on the one hand, the platform will seek to provide services in a wide variety of fields (in my old post, using a couple of platforms as examples, it is shown that this leads to increasing inefficiency). On the other hand, the platform can provide services to some of its clients at the expense of others. A classic example is when social networks trade data on account activity, manipulate search algorithms, and so on.
A kind of dynamic equilibrium is formed between centralized and decentralized digital services, which can shift in one direction or another due to government regulations (for example, censorship requirements for social networks and banking operations) or market innovations.
That’s all for now. Directions for further reflection: 1) consider the main market innovations designed to increase the decentralization of information exchange, including the exchange of property titles to scarce resources; 2) consider approaches to the decentralization of law—a key ancap technology without which a social order cannot be called ancap at all; 3) an overview of the decentralization of utility services; 4) an overview of decentralized approaches to waging war. It may well happen that the next post will have nothing to do with these points, but it still seems useful to leave some hooks for the future.
