What Incentives Will Push Users to Move to Decentralized Applications?
In light of Elizabeth Warren’s proposal for breaking-up the big US Tech companies such as Facebook, Google, Amazon and Apple, some potential beneficiaries are already rejoicing at the prospects of a break-up, while others are betting on the fact that new startups that are based on decentralized business models will eventually usurp them by virtue of new user acquisitions.
However, we shouldn’t rush to believe that it will be so easy for these potential beneficiaries to expect users to fall into their lap, just because they will be based on decentralized models.
Of course, centrally-run systems could become unfair, corrupt, untrustworthy, evil, abusive, inefficient, expensive, or eventually plain useless. And there are plenty of examples to go around for each of these cases, and you would think that these bad practices would be enough to move users away from them.
Although I believe that one of the best value propositions the blockchain has for itself today, is to become an enabler for all these decentralization-focused business models, I’m not sure that it is going to be enough to move users to these systems, away from the centralized incumbents, just because the data is decentralized or not owned by the operator.
We can’t just say – let’s have a decentralized twitter, decentralized facebook, decentralized messaging, etc. just because it’s decentralized, and expect users to flock to these new applications. The incentive must be stronger for users to care about moving. There is a psychology of change that is prevailing here, and it goes like this: People are risk-averse in the domain of gains, and they are risk-seeking in the domain of losses.
As I covered this point in my previous talk Unpacking Decentralized Governance in the Blockchain Era, this means that- you aren’t going to move users or people to try something new if they are currently happy with what they are using, and you just tell them it is “better”. But if someone is currently experiencing a loss, a pain, a defect, a deprivation, or something negative, and you come in and propose to them a solution that stops these pains or losses, the motivation to move are much greater and they would gladly do it.
So, I think there will be two ways that users will move to these new systems:
- Via catastrophes that result in data loss, thefts, breaches, etc from the central players that lead to real financial and harm-type of losses for users, and that will push users to move to these new systems.
- By introducing new features and benefits that are not available from incumbents so that new users will be drawn to them for those uniqueness, and not from a “better me-too”.
Finally, we should keep in mind that all of these central players will have more than one trick up their sleeves, and if the tide moves completely to decentralized data, they could become two-faced about it, just like Mark Zuckerberg just did for privacy, and they will declare they are all for decentralized data as well.
How these new decentralized players emerge, and how they compete against centralized players is a very interesting development that will start to unravel in the coming months and years.
We plan on covering that topic at the next Token Summit in New York on May 16th where we will have a specific discussion with some of the new players that are leading this new paradigm shift.