Unpopular Opinion: Centralization is the Future, Not Decentralization
Mental Models for Crypto Investing
Theo Delarosa
March 11, 2023
Hopes and Dreams Will Only Get You So Far
Before we get started, lay down your virtual pitchforks because decentralization is indeed the better choice (team decentralization over here). We should strive to accept it into our technology, however the reality of implementing it on a large scale for users is just unrealistic.
The ultimate conclusion is that decentralization is better for the individual but disastrous for the masses. All the optimism and WGMI vibes in the world won’t change reality.
Decentralization sounds great in principle but in practice it’s honestly not likely to work in the way people want, expect and most importantly NEED it to. It’s impractical. The general population shouldn’t and or doesn’t want to self custody their own funds.
It’s also the sad truth that most people shouldn’t be entrusted with it anyways because most people are idiots.
A Recipe for Disaster
The most basic and core fundamentals of how a blockchain works makes it impractical for everyday use and a wide audience. It’s the immutability of the blockchain that’s the crux of the issue. What happens when you lose access to your funds or make a mistake?
That's the real conundrum. DEXs offer greater security, privacy, sovereignty and trustlessness but they also bring with them a level of complexity that the average person may not be able to handle. Nor should they have to or want to.
Technology has only served to make our lives more convenient over time. New technology that makes our lives more complicated is definitely not bullish. Whatever solutions are being built MUST follow the natural trend of technology and simplify our lives.
The Ultimate Barrier - Immutability and the Lack of Customer Support
Centralized exchanges are unfortunately much more user-friendly and offer a level of convenience that many people are willing to trade off for security and all the other benefits of decentralization.
They also have the ability to offer customer support (despite it being shit sometimes), something that DEXs are unable to do in the same capacity. This makes CEXs a much more appealing option for those who are new to the world of crypto.
Hell, even advanced veteran users are not immune to making a mistake and needing support for help.
This is the ultimate barrier and one that makes crypto unrealistic for the masses until it’s fixed. Mass adoption will never happen around a service that doesn’t allow do-overs. Copy and paste the wrong address? Funds lost forever. Get hacked? Funds lost forever.
Make a mistake operating on-chain and that transaction is forever stored on the blockchain, irreversibly. How can we expect people to go with that?
The immutability of the blockchain is great for some purposes but it’s incredibly hard to see people accepting a finance system where one wrong move means your money is GONE.
Better for the Individual but Disastrous for the Masses
In conclusion, while decentralization may be better for the individual, it is unlikely to become the dominant model for the masses. CEXs will continue to play a significant role in the crypto market - Unfortunately.
While DEXs have their advantages and everyone SHOULD want this, they are simply not practical or accessible enough for the general population (Recall they are idiots). In the end, it all comes down to what the masses want and what they are willing to use.
Closing Food for Thought: One common counter to this idea is that smart people will eventually build solutions to take care of this. Soooooo, they’re going to make blockchains not immutable anymore? What’s the point of a blockchain then?
Spoiler: We’re all just here to advance the idea that crypto is the future so our bags can pump and we can make lots of money.