Decentralization is important. Let us discuss the reasons further by considering the harms of global monopolies.

Many critics do not understand the value of blockchain. But I can’t say it’s entirely their fault. As I often tell my clients, anything that can be done on a blockchain can be done better, faster, and cheaper using a centralized system. Why bother using blockchain?
Blockchain is an incredibly complex system where everyone verifies the work of everyone but themselves. If you think public key cryptography is cumbersome, zero-knowledge proofs are difficult to understand. Frankly, I gave up trying to understand everything and decided to just trust what the Ernst & Young (EY) R&D guys told me.
So what is the value of public blockchain? Why are you having such trouble?
The answer is decentralization. Decentralization is a unique feature that cannot be achieved in systems other than public blockchains.
Less talked about is why decentralization is so important to the long-term prosperity of every company on the planet and all of us. The value of decentralization is estimated at approximately $1 trillion annually in the United States alone, and that number is growing every day.
An era when decentralization was taken for granted
Decentralization has always been important, but it hasn’t received much attention because of the way the world works. In the past, the level of decentralization was much higher than it is now.
As a child, visiting my grandparents in Europe was like visiting an amazing world, almost identical but somehow different. Blaupunkt radio, Grundig television, Marks & Spencer clothing. There were many things I had not seen in the United States. What I thought would be the same wasn’t the same. The Ford Escorts operated in Europe bore no resemblance to the Escorts sold in the United States.
This decentralization required no planning or conscious effort. In the past, running a global organization was virtually impossible. Before there were global corporations, there were multinational corporations. A multinational corporation was a company that operated in several countries, each of which was its own company.
Products varied throughout the world. There was no real-time data network for design collaboration. At a time when the cost of a five-minute international phone call was equivalent to the cost of a family dinner, it was unrealistic to form a global design or engineering team. There were no global software products or data networks.
Global monopoly era due to digitalization
However, the world where local specialties and variations existed gradually disappeared. Digital technologies have enabled expansion and integration. Over the decades, large-scale production and digitalization have eliminated thousands of small brands and businesses. This was a good thing for all of us. In today’s global economy, radios, televisions, clothing, and more are more affordable than ever before.
But while scale has centralized manufacturing and made things much cheaper and more uniform, digitalization has also ushered in a new global era of centralized digital monopolies and cartels. This was not a good result.
The root cause is that digital markets are almost entirely the result of natural monopolies, and software and networks are turning almost everything into a digital market.
Let’s take the simple experience of taking a taxi as an example. As a child, my experience riding a taxi varied depending on my location. Expensive luxury in London. It’s cheap and convenient in Athens. It’s an unavoidable expense in New York, especially when it comes to getting to and from the airport.
Everything was different and unique. But now it’s all about ridesharing digital marketplaces. Two companies dominate this industry globally.
Software and network economics have made this inevitable. Whether it’s messaging or ridesharing, the value of a network increases with more users. The more users there are, the more attractive it is to join the network. Over time, keeping up with the market leader becomes increasingly difficult and eventually almost impossible.
do not misunderstand. This process is critical to business transformation. The initial steps of investing in digitizing and perfecting your marketplace are very difficult, but they create tremendous value.
Developing a real-time system that connects drivers and passengers in almost any city, integrating GPS maps, navigation, pricing models, rating systems and payment systems is a monumental task. The resulting system is so great that the first time you use ridesharing it feels like magic. All you have to do is drive the car to your destination, get out of the car, and drive away.
adverse effects of monopoly
Digital integration and marketplace development initially offer great value to both buyers and sellers, but over time, things start to go wrong. At some point, emerging monopolies begin to behave more like exploitative monopolies than valuable ecosystem developers. Prices and fees begin to rise, and companies begin an endless cycle of data mining and market exploitation.
I’m not complaining about the high fares or the dishonest drivers I encounter. Academic evidence is accumulating at both micro and macro levels. The large retailers that dominate the market are capturing an increasing share of third-party sales. Ride-hailing companies have increased their prices and stock prices significantly in recent years as the market has consolidated.
At the macro level, technology-driven corporate profits and industrial integration are at their highest levels since the guild monopoly era of the 1920s. We live in a global golden age of centralized monopolies, many of which are supported by technology.
Not all network-based technologies create exploitative monopolies. Decentralized networks have an impressive track record of being non-exploitative and monopolistic.
The Internet is a representative example. TCP/IP, the core technology that powers all Internet communications, is free to use and requires no permission. Internet access has become extremely affordable in most parts of the world. Email is also a decentralized protocol. There are no monopolies in these networks because there is no central company with an obligation to maximize shareholder value.
Why pay a software company 30% of the price of a shared ride when you have a global network for near-instantaneous communication that is incredibly reliable, extremely cheap, and has been running flawlessly for decades? Does it really have to be that way?
Overall, the Internet is much simpler than ridesharing. The only difference is that one is run by a few centralized companies, while the other is a decentralized, open network. This is not a story of resistance to capitalism and free markets, but of the damage that monopolies and monopoly corporations do to human flourishing.
Exclusive Costs and Solutions
There are three options to avoid the world of endless monopolies. The first is to halt progress in digitalization and networking. Second, thoroughly regulate all monopolies. The third is to build a decentralized system that prevents monopolies from becoming monopolies.
The first is not a real option. The second option is a political nightmare. The third option is Ethereum. This is TCP/IP for business value and the path to digitalization without the risk of becoming a global taxi company for ridesharing.
How does this fit into the bigger picture of economics and policy? Monopolies seeking to maximize commercial profits generate “deadweight losses.” In other words, a monopoly that maximizes commercial profits sets the price of its products at a level that maximizes profits, regardless of the price of the product. Naturally, prices will be higher than in competitive markets, and consumption of the product will also decrease.
It is not just that wealth is transferred from customers to monopolists. Of course, monopolies make more money, but the overall economy becomes smaller because they produce and consume less.
How much do these cost? Thomas Philippon, a finance professor at New York University, estimates that monopolies cost the average American household $3,600 a year (roughly 500,000 yen, or 140 yen to the dollar). They are being forced to make sacrifices equivalent to about 5% of U.S. production. For the U.S. economy as a whole, the cost would be nearly $1 trillion. As the world becomes increasingly digital, that number will only increase.
｜Translation and editing: Akiko Yamaguchi, Takayuki Masuda ｜Image: Shutterstock ｜Original text: Decentralization is key, and we don’t talk enough about why.

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