Centralized vs Decentralized Business Models
Since the beginning of modern-day enterprise, humanity has relied on centralized entities and authority to create the global market we have today. Industrialists like John D. Rockefeller, J.P. Morgan, Andrew Carnegie, and Vanderbilt used centralization to pave a path towards modernization. Visionaries like Walt Disney, Steve Jobs, Bill Gates, and Mark Zuckerberg helped revolutionize the global market through these same centralized systems. While many great accomplishments have come from centralization, it has also spawned corruption, surveillance, and a lack of trust among each other.
With the advent of decentralization and blockchain technology, we are able to fix these mistakes and create a true peer-to-peer economy. However, some of you many not full grasp the concept just yet, so here are some takeaways to help you understand the fundamental differences between centralization and decentralization:
1. Governance Models
In an article from CoinCentral.com, centralized governance was described as, "Businesses that make decisions based on hierarchal leadership and that are not based on a consensus reached through public voting. For example, policies established by a company like Apple or Google dictate whether a new mobile application will be approved or not. Under this system, a few key people within the company make this determination or set up governance systems and policies. This is a very centralized business model". (Rhodes, 2018)
While centralized businesses are usually controlled by only a few powerful people, a decentralized business model relies on a system that prevents any single individual (or group) from controlling the entire company. This creates trust among parties and prevents corruption. This system could also be implemented into a government to prevent voting fraud, back-door deals, and dirty money.
2. Revenue Models
If you have ever published an ebook on Amazon, uploaded an App to the App Store, or if you're an independent artist like Chance The Rapper, you probably understand the struggle of sacrificing a large portion of your royalties in order to gain exposure on a large, centralized platform. Here's a good example of this from CoinCentral.com. "Apple and Google both utilize a 70-30 split on revenue for mobile applications, songs, ebooks, and other products sold on their platforms. While developers do get to keep a large portion of the funds, it’s important to note that these companies process 100% of the payment and keep a relatively large portion of revenue, making them highly centralized from a monetary perspective". (Rhodes, 2018)
So how can this be rectified? Decentralization! This may get repetitive, but it's very important and I want you to remember it. Blockchain projects like Blockstack, Tron, Musicoin, and others are leading the way in protecting inventors, artists, and visionaries who want to retain their independence. Instead of 70-30 royalty models, blockchain will create 99-1 models, emphasizing the creator over the system.
3. Multi Sig
The last thing I want to touch on is multi signature addresses. In my opinion, I think this is the most under-valued attribute of blockchain tech right now. It's going to change the way business is conducted and it will lead to the ultimate wealth protection system. Here's how it works. If you own 50% of a company and your partner owns the other 50%, you could use multi signature bank accounts to ensure that no transaction is made without the others approval. Think of it as needing two keys to unlock one door. This can protect your digital assets from theft, unjust oversight, or corruption by giving you plausible deniability and protecting your assets.
While their are numerous examples and methods of explaining the difference between centralization and decentralization, these examples should give you a general understanding for now. The big take away is individuality. We live in a system that oppresses others for the benefit of the few and encourages complacency. A decentralized system gives everyone a fair shot to win or lose based on their own merit, prevents corruption from polluting society, and abstains from stifling individualism.
I would like to thank CoinCentral.com for allowing us to reference one of their original articles in the creation of this article.
Link: Original CoinCentral.com Article
Rhodes, Delton. Comparing Centralized vs Decentralized Blockchain Business Models. 25 May 2018, Comparing Centralized vs Decentralized Blockchain Business Models.
Ashton Kutcher donates