The Future is Centralized Decentralization
If we’re not careful Web3 will T1000 back in to Web2 — and maybe it already has
In the 1991 blockbuster film Terminator 2: Judgement Day the main antagonist is a “shape shifting android assassin” with some pretty interesting properties. According to Wikipedia:
“…the T-1000 is a more advanced Terminator, composed entirely of a “mimetic polyalloy”, rendering it capable of rapid shape shifting, near-perfect mimicry and recovery from damage. Furthermore, it can use its ability to liquify and assume alternative forms such as fitting through narrow openings, morphing its arms into solid metal tools or bladed weapons, walking through prison bars, flattening itself and imitating the pattern and texture of the ground to hide or ambush targets.” Additionally:
“When separated from the host each liquid form cell is programmed to detect and seek out larger groups of cells within a range of 29 kilometers.”
Let’s go over those properties:
- Rapid shape shifting
- Near perfect mimicry
- Assumption of alternate forms
- Ability to reform as whole when scattered
Or as seen in action:
Applied to Blockchain
Let’s go over these one by one and apply them to the blockchain ecosystem:
- Rapid shape shifting? Check. Bitcoin is digital cash! No it’s a store of value! Actually it’s a settlement layer for upper layers!
- Near perfect mimicry? Check. Thousands of unoriginal and unimaginative clones of chains, NFTs, DAOs, existing Web2 products and services, etc.
- Assuming alternate forms? Check. Re-definitions and technical compromise in the blockchain space often emerge when sgnificant fundamental limitations are encountered — security (Lightning and other L2s) and decentralization (Solana) to address scale as two good examples. Goalposts get moved on a regular basis.
The most interesting to me, however, is the ability to reform as whole when scattered.
The Rise of the Centralized Blockchains and Web3
Blockchains are fundamentally decentralized. This is true. There are currently some 15,000 Bitcoin nodes online. There are 5,000 Ethereum nodes online. Looks pretty decentralized to me!
That is until you look a little closer…
The vast majority of products and services people actually use to interact with various blockchains are powered by a few already astronomically valued very powerful (centralized) companies:
Alchemy (Self-described “AWS for blockchain” — valued at $10 Billion)
- $30 billion on-chain transaction volume
- 10+ million end users powered
- Powering all major NFTs
Disclaimer: I’m an Alchemy user (whether or not you realize it you probably are too).
Consensys (valued at $3.2 Billion)
Products and usage:
MetaMask — 21 million monthly active users
Truffle — 4.8 million developer downloads
Infura — 350,000 developers
Clients — 2000 global clients and partners, including:
Oh yeah, plus all of these. If you use MetaMask by default it talks to an endpoint hosted on Infura and may interact with a smart contract almost certainly involving Consensys (Truffle and OpenZeppelin) using cryptocurrency you bought from Coinbase in part powered by Consensys. Consensys top to bottom, bottom to top. Phew that was a lot!
Disclaimer: I use MetaMask, Truffle, and Infura (whether or not you realize it you probably are too).
Quicknode (value unknown, but last raised $35 million in a series A)
I’m not directly a Quicknode customer but like Alchemy and Consensys we all end up using them almost every day.
Not at all. Turns out delivering a reliable product or service with blockchain at any kind of scale is really hard. Running your own node infrastructure is really hard. I have personally experienced the pain of doing this myself. It’s not pretty and it’s getting worse (more on that in another rant).
Companies like Alchemy, Consensys, and Quicknode are used by almost everyone in Web3 for the same reasons companies use Amazon Web Services, Google Cloud Platform, and Azure in Web2. As a company, startup, etc building a product why mess with all of this low-level node stuff when these big three have already figured it out for you? Because of them you can install a library in your project/product and just hit an API like we’ve done on the web for years. Instant blockchain and you know what — it actually works!
“Using your own node or an error-prone service means wasting hundreds of valuable engineering hours on problems that have nothing to do with your company. Nothing else compares to Alchemy’s amazing level of reliability, speed, and support.” — Alex Atallah, Co-Founder and CTO of OpenSea
These blockchain infrastructure companies aren’t valued in billions of dollars each because they don’t do anything of value and no one uses them. On the contrary — they have great products that have rightfully attracted many, many users.
It actually gets worse — more than a few blockchain solutions have been exposed as being hosted by Google or Amazon (foreshadowing for another future rant).
As I’ve noted before this space is in many ways just really getting started but already the principles of decentralization don’t seem to hold up in the real world. Let’s be very clear what this means:
To most end-users of blockchain products and services the “distributed blockchain” is whatever a handful of multi-billion dollar companies say it is.
I don’t know about you but this already looks a lot like the “consolidation in the hands of a few powerful players” that is Web2 to me. What we’re witnessing now is likely just another generation of companies angling to be the next Google, Facebook, Amazon, etc (with multi-billionaire founders to match). Not to mention — in any gold rush there’s a lot of money to be made selling picks and shovels.