When the web first emerged I remember vividly the excitement that I and many others felt about the potential for decentralized and permissionless publishing. Want to put some content out there? Register a domain, run a web server and publish. No newspaper, journal, book publishers and editors to ask for permission. A massive shift of power to the people.
Fast forward to 2016 and we have an internet where much of the activity is dominated by a few super large players with centralized platforms, most notably Facebook and Google but also others including Twitter. As investors who early on bet on network effects we know well how this happened. And because production functions based on information are supermodular these network effects are now leveraged into adjacent spaces (which is made easier by massive profitability).
The key takeaway though: technology by itself doesn’t want anything. It makes things possible. The web made decentralized publishing possible but it *also* made large centralized platforms possible. Where we wind up in this massively enlarged space of possibility is *not* determined by the technology but rather by the workings of society and economy. Those in turn respond to changes in beliefs and regulation. So it comes down to what we as humans want our society and economy to be like.
I am pointing this out because we are making a similar mistake in the pursuit of blockchains and encryption. I am a big fan of what blockchains can do to help undermine network effects by moving data into a layer that is not controlled by a single organization. I have also written about my fears of heading into a spy versus spy society in response to widespread adoption of encryption.
Blockchains and encryption once again broaden the space of the possible. But in and of themselves again this technology does not want anything. Yes on the surface both technologies look like they are somehow inherently decentralizing. And their most ardent advocates truly and deeply believe that once we get to a world of blockchains and pervasive encryption we will finally truly have given more power to individuals.
I don’t believe that to be true. There are still plenty of centralizing forces in the world, in particular the existing and growing concentration of capital and information. Let me give two concrete examples.
The first are offshore entities for hiding capital. Some people have celebrated how encrypted communication played a role in the Panama Papers leak. You can bet though that quite rapidly all communication and documentation about offshore entities will be fully encrypted thus making future leaks of the same form much, much harder.
The second are medical records. Sure people could start keeping their medical records with their own keys in the blockchain. That, however, will do nothing to the structure of the medical and pharmaceutical industries which currently are the only ones who can amass the kind of large scale data collection that is necessary to develop and test new treatments.
If we want to reap the benefits that blockchain and encryption technologies can have for increasing individual freedom then it is *not* enough to build them. We must also want to change ourselves and society accordingly. And that requires a critical dialog about what regulatory and belief changes are necessary so that we can accomplish these through democratic processes.
