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Almost everyone living today has lived under a centralized, managed economy their entire lives. Psychologically, that makes it an uphill battle to convince most people that decentralization has greater benefits, more upsides, and limited downsides. In other words, it's hard to convince someone of the truth if they've lived a lie their entire lives.
Central banking has been around since the 17th century. While not the first central bank organized, the Bank of England had been established long before Adam Smith published his book The Wealth of Nations (1776).
It didn't take long before U.S. revolutionaries began discussing the idea of a central bank. The Revolutionary War came to an end in 1783. The Constitution was ratified in 1788. Until then, the nation was governed by the Articles of Confederation, essentially a document that upheld the values of decentralization. Alexander Hamilton, then U.S. Secretary of the Treasury, proposed the idea of a national bank in December 1790. He used the Bank of England as its model.
President George Washington signed the bill that established the first national bank in February 1791. Central banking had come to the newly formed United States of America.
The bank did not establish monetary policy as today's Federal Reserve does. Rather, its purpose was to collect taxes, secure government funding, issue government loans, and pay the government's bills. The bank got the money for these activities through an initial public offering that resulted in $10 million capitalization, $2 million of which was government funding and the rest coming from private investors. The bank was chartered for just 20 years, but it was the largest corporation in the U.S. during that tenure.
For much of the 19th century before the Civil War, the U.S. had no banking regulation. That meant that anyone could start a bank and issue currency, as long as they had the required capital to do so. During this Free Banking Era, banks were regulated at the state level. There was no national regulation.
The absence of national banking regulation is often cited as the reason for many of the economic booms and busts of the period. This wild volatility in the nation's economy is used to bolster arguments in favor of a central entity that sets monetary policy and "manages" the economy. Then, in 1913, the U.S. created the Federal Reserve based on the principle of managing the economy. The monetary policy that was followed at the time is widely considered the impetus for the Great Depression in the 1920s and 1930s. So much for central management.
While there certainly are benefits to a managed economy, there is one stark reality that cannot be denied: Central management always leads to a favored status for some at the expense of others.
The War Over Crypto Is Far From Over
It's easy to be critical or skeptical of cryptocurrency when we have huge personalities making big blunders. It's a fact that crypto has been mired in controversy from the very beginning. It's no wonder Satoshi Nakamoto insisted on anonymity. Smart move on his (or their) part.
Changing the terminology hasn't helped. In recent years, crypto enthusiasts have begun calling anything that moves in the cryptocurrency ecosphere "Web3," as if calling it Web3 makes it something valuable. Of course, smart people like Molly White, who runs the X account Web3 is going just great, make salient points by criticizing it. White is a Wikipedia big wig, which puts her in the coveted position of being a centralized functionary.
It's no accident that nearly all of decentralization's biggest critics are important spokes or hubs in their centralized circles. These itinerant voices include such luminaries as:
Warren Buffett - Famously called bitcoin "rat poison squared".
Peter Schiff - He's said that the only cryptocurrency that makes sense is a gold-backed one.
Paul Krugman - The award-winning economist believes crypto is used mostly for illegal activities and Ponzi schemes.
Bill Gates - Microsoft's founder believes bitcoin is bad for the environment and crypto funds terrorism.
Gary Gensler - The Securities and Exchange Commission's big head believes everything except bitcoin is a security.
What do each of these big brains have in common? Other than achieving a level of success in the real world, they are all heads of or chief talking voices for centralized organizations. In one way or another, they make their living off of centralization or by being in control over a centralized organization. Because they fear that decentralization could disrupt their business models, they want to instill fear in others.
I'm not saying they don't have valid criticisms. Certainly, criminals use crypto to do bad things, but it's a fallacy to claim that all crypto is used for criminal activity. There are legitimate uses for cryptocurrencies.
It's also true that investing in crypto is risky. Of course, all investing is risky. Some investing is more risky than others. Every investor, in crypto or traditional asset classes, must perform a risk analysis and choose investments based on their risk aversion. For that reason, I reject any argument that claims that crypto should be banned to "protect" investors from schemes and scams. Are there schemes and scams? Yes. But the schemers and scammers should be rooted out and punished while everyone should be left free to pursue their passions.
There will always be detractors. Those who have built their empires on the backs of centralization will never see decentralization's benefits.
Web3 Is a Panacea, Not a Magic Pill
While I believe there are valid criticisms of cryptocurrencies and Web3 projects, it's foolhardy to lump them all together in one basket. Yet, this is what most crypto critics and skeptics do. Any scam, scheme, fallout, loss of value, pump and dump, rug pull, or other mishap occurs, they will say it's time to burn the bridges.
I've said it before and I'll say it again: For every downside there's an upside.
That's true for both centralization and decentralization. That's why you won't find me trying to tear down what others have built. I don't want to do away with all government, nor do I believe that every business would benefit from a decentralized model. There are times when I want centralization. I believe both centralization and decentralization can exist in the same world, but not in the same place at the same time.
That last sentence is critical. Allow me to repeat it: Centralization and decentralization cannot exist in the same place at the same time.
Despite this basic, simple truth, many Web3 projects are promoted as decentralized when they are, in fact, centralized. And this isn't helping the legitimate projects that are actually decentralized and provide value. Hive, for instance, is not owned or controlled by any one entity. Lens Protocol, however, which purports to be a "decentralized social graph", still has a waitlist and requires potential users to request approval before using the product.
In Web3, it's important to manage expectations. Web3 projects that claim to be decentralized but clearly aren't should be called out and shunned by true proponents of decentralization. We should not expect centralized authorities to clean up the mess. They don't have a good track record of cleaning up their own messes. In fact, in many cases, they are the cause of their own messes and their insistence that the same centralized strategies that caused such messes will fix them is buffoonery.
We are involved in a great dance. Centralization and decentralization vie for the same attention. The best weapon centralization has to gain the attention is desires is hype. Its back up involves bullying. Both of these tools are thorns in the side of decentralization, whose big advantage is simply being itself. No hype. No bullies. Just pure old unadulterated freedom.
We often think of freedom as "toward" something. Freedom to .... Therein lies the rallying cry. The free individual must be free to ___________. Fill in the blank. But there is always the "freedom from" side of that, as well. In decentralization's case, freedom means from coercion, from identity theft, from censorship, and from the management biases of centralized institutions. Every "to" aspect of freedom has an associated "from" aspect to it. Centralization minimizes those freedoms while decentralization maximizes them.
Over time, the U.S. has moved from a decentralized set of colonies to a centralized empire that claims to protect the freedoms of its citizens while imposing limits on that freedom. So too has the World Wide Web. Web3 has arrived to reclaim some of those freedoms. And we can do so simply by putting them into practice.
In short, Web3 is a panacea for the ills of centralization, but it's not a magic pill. It can't fix the problems of centralization, nor should it try even though centralized entities will do everything they can to bring it down. Let them try. They will hate us, but proponents of decentralization should continue doing what we do best, namely, claiming the freedom that is already ours.
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