Published on Feb 28, 2021

The fallacy of decentralization


“Crypto is libertarian, AI is communist” Peter Thiel

In my last post, I wrote about the long-term potential of decentralization. It was a romantic ideal of the future. While I still believe this to be true, the future is not written. As it stands today, it feels like we are headed in the opposite direction, towards a world of centralized control with the appearances of a decentralized one.

Sure, we all now have access to platforms & technologies yet, as recent events have demonstrated, it can be a mirage.

Centralization is accelerating

The ability to create your own ecommerce site, program APIs and send email is an incredible achievement. It has enabled millions of people around the world to pursue their own careers and new companies to flourish in pursuit of providing greater and greater access. It is enabling a whole new creator economy to emerge.

These services are truly remarkable but are conducive towards centralization. Given the digital economy’s network effects, there will be one winner for each category. If someone wanted to suppress an individual(s), it would be easy to do so. This isn’t theory, it has already happened. I’m not worried about the obvious cases of harm, it’s the ones that we don’t hear about that are troublesome.

If viewed through this lens, centralization is actually accelerating. As power accrues to these centralized platforms, the risk of censorship actually goes up.

Can we achieve true decentralization?

This is why the world of crypto and Bitcoin in particular are so fascinating. No one is in charge and the system can’t be hacked. Yet to replace every part of the technology stack with a decentralized, crypto enabled service seems like a long shot – at least today. These services have a huge lead and are only getting better. Think of Stripe or Shopify. Tens of thousands of hours and hard work have been put in to render the services easy to use. It seems like a stretch that they will be displaced anytime soon.

Solving the incentive problem

Capitalism allows for people to engage and create companies to solve problems and make money. Customers and users are not typically shareholders. This is where the alignment of incentives with tokens can create a whole new way incentive structure. The ICO craze of 2017 was in part fueled by this sales pitch. It’s not just the typical stakeholders that can profit from a company, but also its users. If this problem can be solved at scale, then there is a chance for decentralized service to win & gain traction.

This is what Peter Thiel’s quote implies. Artificial intelligence technologies are enabling radical centralization of the technologies we use. This isn’t malicious, it’s simply the dynamics of the system. Crypto is libertarian in nature because they allow for people to have more control and agency over what they do. Seems like a brighter future to aspire for.

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