I’ve long had the idea of setting out my thoughts in detail on the phenomenon of decentralization. However, the topic is too expansive to fit within a single article, even if it’s a lengthy one, and hasn’t yet solidified in my mind into a coherent structure for writing a book. Therefore, I plan to release a series of posts gradually, which likely won’t be linked by a consistent narrative thread. I do not know how many posts will result, nor whether I will eventually determine that the topic has been sufficiently explored, or simply abandon it over time. The posts will be numbered chronologically, and if the material ever forms the basis for a book, the order of reasoning may change. Let’s conclude with the disclaimers and proceed.
Libertarians have their own particular fetishes. Because they generally prioritize individual interests over group interests, they will, all else being equal, always prefer decentralized structures and mechanisms. It is relatively clear how this operates in coordinating efforts: when a task is important enough for community participants, they’ll collectively solve it, albeit with arguments regarding who undertakes what and in which order. Nevertheless, they typically find agreement easier than appointing someone to direct other people’s efforts.
This primarily applies to short-term projects where individuals return to their own affairs after jointly solving a problem. Once we are talking about infrastructure issues that require a continuous effort, such temporary agreements prove ineffective. Consequently, private initiative prevails; the issue is addressed by whoever has the strongest interest in getting the problem solved or who anticipates monetizing the benefit they provide.
Whether a centralized or decentralized solution proves advantageous largely depends on economies of scale, which can be both beneficial and detrimental. In this context, digital infrastructure is particularly interesting because negative effects of scale are relatively minor, while positive ones are substantial. Consequently, businesses reliant on providing a digital platform will expand until they have swallowed up the entire available customer base. The limits of expansion will primarily stem from competitive pressure. Besides increasing customer numbers, the platform seeks to extract the maximum possible benefit from each customer. To achieve this, the platform will offer services across various fields (as illustrated in my previous post concerning a couple of platforms—this leads to increasing inefficiency). Alternatively, the platform may provide services to one client at the expense of another. A prime example is when social networks trade in user activity data and manipulate content-ranking algorithms.
A dynamic equilibrium emerges between centralized and decentralized digital services, which can shift in either direction due to government regulations (such as censorship requirements for social networks and banking operations) or market innovations.
To do:
1) Consider the main market innovations designed to increase decentralization of information exchange, including the exchange of property titles for rare resources;
2) Explore approaches to decentralizing law – a key ancap technology without which the social order cannot even be called “ancap”;
3) An overview of decentralization of utility services;
4) An overview of decentralized approaches to conducting war.
It might turn out that the next post will have no relation to these points at all, but it still seems useful to leave myself some threads to pick up in the future.
