- Centralized systems are not inherently flawed. Comparing safe havens of private decentralized networks to modern embodiments of centralized systems is not a comparison of equals.
- The history of institutional banking is the history of consolidation and centralization of resources in the name of efficiency and benefit to the end user.
- Intentionally or unintentionally, FinTech is repeating every step of the history of institutional banking.
Centralized systems are not inherently flawed, just like decentralized systems are not universally beneficial.
It is at least unfair to compare existing for centuries centralized systems to a theoretical concept of a decentralized system, and even to POCs. The world is yet to see an international, or even national, organization fully running its data and operations on a much-hyped decentralized ledger technology; an organization serving the needs of the whole population of one country and thousands of businesses, and able to serve those needs abroad with the same success as domestically. The Federal Reserve System, the Financial Action Taskforce on Money Laundering, the United Nations, the Department of Homeland Security, BRICS, MasterCard, Google, AXA, Metlife, etc. – any entity of people, nations, businesses of national and international importance.
Modern centralized systems embodied by all existing organizations and nations have vulnerabilities because hackers had time to get to know and understand how centralized systems work, test and develop advanced hacking techniques. That does not, however, mean that vulnerability to attacks is an inherent flaw of any centralized system. Some systems are protected better than others, and it is a matter of advancements in cybersecurity for centralized systems to have a chance to sustain attacks of proponents of decentralized systems.
As Adam Ludwin, Co-founder & CEO of Chain, put it in his elaborate but well-put letter to Jamie Damon, “Decentralized applications are a new form of organization and a new form of software. They’re a new model for creating, financing, and operating software services in a way that is decentralized top-to-bottom. That doesn’t make them better or worse than existing software models or the corporate entities that create them. As we’ll see later, there are major trade-offs. What we can say is simply that they are radically different from software as we know it today and radically different from the forms of organization we are used...