The movement toward decentralization isn’t new. The world has been looking for local solutions that empower smaller groups for decades, if not longer. The simple fact is that people in smaller groups can better adapt to changing social and economic conditions, and centralized control structures can’t match this level of adaptability.
According to the Worldbank,
“In practice, all services do not need to be decentralized in the same way or to the same degree. In an important economic sense, the market is the ultimate form of decentralization in that the consumer can acquire a tailored product from a choice of suppliers.”
Decentralization is here, and it is creating changes at every level of the global economy. Other systems, like cryptocurrency, seek to allow people new ways of doing business and making global connections.
Despite the push-back from established authorities, the movements towards decentralized systems are moving forward. One of the biggest themes of the 21st century may be a constant move toward highly decentralized systems and far greater accountability for any centralized structures that are able to remain in place.
Why Decentralization Works
There has been a movement to support centralized social structures for at least two thousand years.
The impetus to question these arrangements really only began in the early 20th century in the West, and concrete action wasn’t taken until colonial structures fell apart, and the USSR disintegrated in the late 20th century.
The benefits that decentralization offers aren’t limited to a single part of the economy or global society.
The Food and Agriculture Organization (FAO) of the United Nations (UN) cites the following reasons why decentralization works for the environment:
“-local institutions and people have a better knowledge of the environmental and socio-economic problems of the area and therefore are best placed to enhance and protect the environment if they are given clear rights (and obligations) with regard to natural resources
-higher responsibility in decision making will be accompanied by higher motivation for more efficient use of natural resources;
-it is more likely to involve less favored groups and populations in the decision-making;
-facilitates local participation because of the higher homogeneity of common needs with lower sizes of population, higher transparency of the decision-making process; and
-allows the building of local capacities for the provision of services that are more consistent with the local requirements.”
It isn’t difficult to see how all the factors listed above can help markets beyond agriculture, but when it comes to actually implement decentralized financial systems, some challenges remain. Despite this, there is hope that new systems could change the way that people access the financial system.
Direct Connections Benefit Everyone
In many ways, decentralization could be thought of as eliminating as many entities from a system as possible, so maximum efficiency is achieved. The financial system uses a highly centralized architecture and is ripe for innovation.
A challenge for decentralized financial platforms that operate with blockchain-based tokens is speed. While a peer-to-peer exchange is far safer for its users, making one that is as fast and liquid as a centralized platform has proven to be difficult.
Polkadex has addressed the speed problem and created a decentralized order book that can achieve a rate of 200 transactions per second, which is faster than some of the leading token exchanges. In addition to this, the platform incentives market makers with part of the transaction fee, which is part of how peer-to-peer platforms reward participation.
In addition to offering faster transactions, the platform that Polkadex created may help to keep costs on older cryptos to a minimum, as it creates the smallest amount of blockchain writes possible. This is part of the reason it is so fast, but as DeFi becomes more popular, these kinds of tools can also help to mitigate high transaction costs.
As more investors opt for decentralized assets, the need for zero counterparty risk platforms, like Polkadex, are likely to rise. While this may seem like a concern for the rich, it can actually help people at every level of the global economy.
Accessibility is Everything
India has one of the world’s largest populations, but as many as 190 million of its citizens have no bank account. These unbanked masses are forced into an economy that is highly inefficient and has been the target of punitive action by the Indian government.
According to a study undertaken at the University of Illinois at Urbana-Champaign, India has struggled to use its extensive bureaucracy to create financial inclusion in the nation.
One of the report’s authors stated,
“While narrowly focused policies are attractive to policymakers because they’re easier to understand, nimble to implement, and able to quickly address an imminent need, the multifeatured policies that emerged over time reflected a better understanding of the complex issues that keep the poor from using formal banking systems.”
Of course, all a person needs to use cryptocurrency, and a peer-to-peer exchange is a smartphone and a connection to the internet. It is easy to understand why centralized financial interests would oppose the use of decentralized technology, especially when it equates to an existential crisis.
The use of decentralized financial solutions removes the need for banks in the way they have been understood up to this point and also puts lending profits in the hands of capital holders. As the century continues to unfold, it is nearly certain that decentralization will continue to grow, with or without an official mandate from centralized authorities.
Disclaimer: This is a paid post and should not be considered as news/advice.