I'll take crypto before TradFi any day but some perspective can go a long way. Decentralization is more than a node count.
Parallel Money
Public cryptocurrencies do two things. First, they cement into code the rules of their financial being. Which is to say, every blockchain project is an island with it’s own tokens and rules. And secondly, they deeply minimize the trust needed for transacting with others.
In contrast, the legacy financial system depends on heavy regulation and data sharing to support it’s inefficiencies. This is to say, without regulation and data sharing, there would be fear of rampant abuse and wide-spread mistrust among themselves. Banks, MSBs, payment processors and card networks do not trust each other by default. And by extension, they do not trust their customers.
These same banking tools used to build trusted, human centric systems at scale also manifest problems of automation and over-compliance. Claims of protecting customers are, in reality, an insular act of protecting self. Customers are continuously surveilled and risk assessed. The net result to customers includes frequent debit card declines and account freezing.
And so it is. dinosaur banking; failing to be fast and efficient. Failing to be a store of value. Re-enforcing why crypto is so damn liberating and increasingly adopted.
Rose Tinted Protocols
But let’s not get too ahead of ourselves. There are thousands of crypto projects out there - the free market in full swing - but many are destined to fail. Some are worthy of attention; technically brilliant, great teams, open source and good decentralization. Yet almost every single of them has a single implementation of the backend server with no viable alternatives. The specification and it’s reference model is also the product. This means, no matter how good the project is and no matter how diversified the ecosystem is, the stage is set for a potential single point of failure or mismanagement.
Products change direction easier than protocols and a project’s governance may actually disincentivize alternatives. Product complexity may also discourage the development of co-existing alternatives.
True protocols do not survive on reference models alone. Diversification of the backend is the long game. It’s the difference between email - the SMTP protocol - and Gmail the product. Despite all it’s flaws, it persists. Protocol developers may be less interested in the spectacular and more inclined to work together.
Now, amazingly, there are only four blockchain projects with more than one implementation of the backend; Bitcoin, Ethereum, Bitcoin Cash and Zcash (albeit a temporary measure). There are some projects like Cosmos and Polkadot that sit somewhere in the middle; where blockchains are formed from building blocks and developers pick’n’mix the various parts, but this is still a shared codebase.
The key takeaway here is perspective. There are some great products out there, and there are some great investment opportunities, but to have both at the same time is rare.
▶️ 3Speak