The problem with Trusted Third Parties and why decentralization has to fight back.

The blockchain has created a way of storing transactions without a trusted third party. Its’ most famous application, the Bitcoin, allows people to transfer money safely and securely without the need of a bank or similar to manage it and “guarantee” it. This means it has no need for trusted third parties (TTPs) — in this case a bank. Because of course TTPs also have to earn money and charge for their service. Without these extra charges bitcoin transactions are cheaper. This is (part of) the reason for the cryptocurrency excitement. Without TTPs the system is cheaper.

Now TTPs exist in many systems. They make money with their reputation. This has three drawbacks for the consumer (I will ignore the advantages for this article). Firstly, as I mentioned above, they charge for it (meaning the product which they are “helping” becomes more expensive). Secondly they produce normally a single point of failure in the system. The moment that someone has to be trusted, when this person is compromised, the system fails. Thirdly, they know everything about you (consider how much your bank knows about you).

Decentralized systems (like blockchain) mean that this weakest link in the chain doesn’t exist. No one person may be compromised. In order to compromise blockchain, you need to take over 51% of the system — unlikely in a healthy growing system. The system is pseudo-anonymized through wallet addresses. As long as you stay “inside the system” no one knows who owns which wallet. Only the gateways to the classic bank removes the anonymization.

All systems start with trusted authorities. Think about the telephone networks when they started. You had to trust the telephone operators to put you through to the correct person. They knew everything about you, and who you wanted to talk to. As the technology improved and become robuster the people were removed from the system as being too expensive. They still know all about you, but this is due to external factors (anti-terrorist laws in this case).

Technology becomes more trustworthy.

Technology or algorithmic replaces the TTP or person in the system. It cuts costs for you as consumer/user. It makes you more (pseudo-)anonymous and becomes more reliable.

The question of course: Can a human trust an algorithm more than another person?

Technology is becoming more and more trustworthy and replacing humans in factories and everywhere. With the new technologies like Artificial Intellligence (AI) or Internet of Things (IoT) people are losing their jobs everyday, as they are replaced with robots and systems. They are thousands of articles everywhere saying what are we going to do about this and various solutions are listed, like Universal Basic Income.

But these changes affect the functional system and not this reputation or TTP business model. In this case the opposite is currently happening. The Tech companies are trying to use their reputations to charge more. Is a blockchain implementation from a large concern more trustworthy than the original or other public implementations? Probably not, as mathematics is mathematics — but the opposite is suggested by the large marketing machines. Do you want to pay more for the same functionality only because of a large listed company behind it? Perhaps for the sales and support? Is it worth the extra 30% in costs?

But the real problem is the dependency of this TTP implementation on the continuing development. The large companies only develop what they can sell. Short term, before the next investor report.

The world wide web was created in CERN in an open world of science. Anyone could join by hosting a web server and then provide the world with information. Everyone could read this information over a web browser. Everything was compatible with everything else. Everyone could build one or the other. Would the same fast development of the internet have happened when one large concern controlled all servers or all browsers? One famous corporation tried and failed. Then the world wide web bloomed and gave birth to various new ideas like social media and blockchain.

Is a decentralized technology like blockchain really decentralized and flexible if it is based on a centralized cloud, owned by one corporation? Five (or six) large companies control the world’s cloud capacity. Would you trust a blockchain based purely in one of these clouds? Do we need a decentralized cloud?

Decentralized cloud technologies are coming, like IPFS (https://ipfs.io) which have the potential of decentralizing storage away from the corporate cloud. Similar ideas are needed for computation hosting or serverless function processing. These ideas are not pushed by the large corporation (difficult to commercialize) — compared to things like AI or IoT.

But these are the technologies that need to be supported. Decentralized services independent of the TTPs. Then the next generation of web can be created for everyone and not just for the corporations.

This article contains my views and ideas and does not necessarily represent the ideas or views of my employer.

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