Ethereum Needs Competition

By November 24, 2022Ethereum
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Hear me out.

As I never tire of pointing out in meetings, there’s nothing you can do with a blockchain that you can’t also do faster and cheaper with a traditional centralized computing infrastructure. While blockchains have generated some very cool new approaches to products and services, including tokenization and smart contracts, they can all be replicated in a centralized system. The essential, irreducible value proposition of a blockchain is true decentralization. Everything else is optional.

For enterprise users, I believe that value proposition is tied to a well-founded fear of the power of centralized market operators and the path they generally take from useful utility to predatory monopolist. This is why private blockchains remain such a silly idea. Decentralization theater doesn’t change the fact that the system operator is just a potential future predatory monopolist.

Paul Brody is EY's global blockchain leader and a CoinDesk columnist.

From ride-sharing to consumer products, the story of the digital economy in the last decade has been the rise of these so-called nearly unshakeable digital monopolists. Along the way, some of these firms may have been raising the share they take of the transactions that are executed on their networks. This generally happens when the value proposition of a marketplace shifts from “it’s a better system” to “it’s just a bigger system” and eventually to “it’s the only system with efficient scale to reach your customers or suppliers.”

Though the world of Web2 is still (historically speaking) new, this isn’t a new problem and we’ve solved it before, not with decentralization but with regulation. In 1895, there were an estimated 6,000 local phone companies in the United States. Each company could set its own rates and had to reach agreements with each other for interconnection. Just like today’s so-called digital monopolies, the big got bigger. Eventually, there was just one dominant player left, AT&T, the eventual successor to the American Telephone Company founded by Alexander Graham Bell and his father-in-law in 1885.

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