The ultimate threat to the globalized world
The world will never be the same. Neither the world economy, nor the way a lot of us – if not all of us – do our business. The COVID-19 outbreak has already shown how fragile human civilization is. And you could say the same about the current globalized economy. As the pandemic continues to spread with over a million confirmed cases to date in 184 countries, and a death toll of almost 80,000 (as for April 7), global markets and local economies are suffering severely.
It’s not only stock markets. Travel, hotel, entertainment industries, tourism, local and international trade, raw materials and natural resource exports, industrial production and retail, all of these and countless other businesses worldwide are testing their all-time lows. And the bottom is yet to be found.
And not only that. Medical care in most nations, including the developed ones, social services, public transit, pensions and taxation are under enormous pressure right now. Some of those industries and sectors will never come back to where they were. Or at least will be forced to significantly reconsider a number of aspects of their operation. Moreover, some governments will fall, several political systems will collapse, a few countries will eventually disintegrate.
Too much centralization kills
So why is the impact of the COVID-19 pandemic so disruptive and groundbreaking? Of course, in the 2020s the world is interconnected and mutually dependent like never before. People can travel very fast, relatively cheaply and en masse from any location to any other. And events in one part of the globe impact the economic picture in another, no matter how far they are apart. Such are the effects of globalization.
While the world is globalized and the economy distributed over a vast territory, it remains predominantly centralized. And that’s the key here. Centralized systems are extremely vulnerable and susceptible to a number of both external and internal threats. And if you think about it, most of our social, governmental, medical, infrastructural and, yes, economic systems are completely or largely centralized.
The same goes for most businesses, both international and local. Most of them are still too centralized in terms of their governance, business model, infrastructure, communication, supply, sales, workforce, etc. And thus, when something goes wrong in the core or center, it critically impacts the entire operation.
Naturally, a centralized structure is much less flexible and self-sustainable in the event of severe external attack (even if the attacker is a tiny invisible organism like the one we have in this case).
Even today’s centralized way of living, exemplified by modern urban civilization, makes it far easier for outbreaks like COVID-19 to become epidemics or even pandemics, as we are seeing. Mega cities and urban agglomerations are the direct result of centralized industrial-type economics, and the cultures and traditions resulting from it. This, despite the need for such population concentration being long ago obviated by modern communication and transportation technology. For many years it has been possible to utilize technology to engender more automation and remote work. However, we did not see any significant shift in labor and other business processes in most industries.
The fact is, previous problems – even major ones like the 2007-2008 Great Recession – seemed not to convince humanity to take real steps towards changing the ways in which our economy and society operate. Previous crises were ‘solved’ by pouring money into the global economy. And history is repeating itself: the US government recently signed a $2.2 trillion (!) coronavirus rescue bill.
Centralized systems are fixing problems in a centralized way. No real paradigm shift, just an attempt to kick the can down the road. Only the price tag is getting significantly bigger. Okay, it kind of worked 12 years ago. But do you think it will work again?
But can’t centralization actually help?
On the one hand, it could be argued that authoritarian and totalitarian (and thus highly centralized and vertically integrated) governments show better effectiveness in combating the epidemic in their countries. China gained control quickly by exercising strict and sometimes brutal measures against the population. Russia and Belarus show comparatively low rates of disease spreading. Moreover, North Korea and Turkmenistan show zero cases of coronavirus.
But isn’t there something wrong with the picture? Isn’t it obvious that the local Wuhan outbreak went ‘viral’ all over the country, and then the world, exactly because the government tried to hide it for too long? Isn’t it obvious that authoritarian regimes tend to conceal the true nature of the problem in their countries? The dictator-like governments are also much more centralized, and the more centralized they are, the less truth they tend to impart to their people and the world. At the end of the day, this centralized way of dealing with the problem has exactly the opposite effect: the disease spreads even more.
Unlike China, countries such as North Korea or some African dictatorships have less to no resources and power to stop that spread, even if they would utilize their enormous domestic administrative power trying. Simply because the overall effectiveness of their economies and thus medical systems is very poor. And that’s one of the sad results of the aforementioned overconcentration and overcentralization of power.
Dictatorships are simply extreme cases that illustrate the point. But of course, democratic countries are also prone to ineffectiveness and human error to an extent, since a particular level of centralization is always there with any government, even a democratic one. We can see what’s going on in Italy, right?
Is decentralization a solution?
Throughout history, it has become apparent that decentralized systems tend to be less vulnerable to attacks and much more sustainable too. A handful of conquistadors destroyed the highly centralized Aztec empire with ease, but they and even stronger powers failed to conquer the Apache, since their society and way of life was quite the opposite to Aztec: Apache had a highly decentralized social and economic structure.
The idea of the internet was to create a fully decentralized communication system that would sustain a direct nuclear attack and continue to function where all centralized communication like telephone and radio networks would be destroyed. This innovation has completely transformed our daily life and the global economy in recent decades.
The Great Recession of 2008 brought to life Bitcoin and other cryptocurrencies as purportedly decentralized answers to centralized, and thus corrupt, banking and financial systems. The idea was great, but it didn’t work as a viable alternative to the existing financial system, mostly due to Bitcoin’s technological limitations. So for now, BTC is occupying an important but relatively narrow niche of ‘digital gold’ – or the safe haven asset of the future (this is still to be confirmed, though).
Bitcoin did, however, give birth to the blockchain technology that demonstrated even more decentralized possibilities. Ethereum started its work on creating a ‘world computer’, a global decentralized operating system that can run immutable and trustless smart contracts. That inspired a decentralized finance (DeFi) movement and a number and other economical, technological and social innovations based on the principle of decentralization. Ethereum and its copycats are forming a so-called blockchain 2.0 (with Bitcoin-like cryptocurrencies being 1.0).
But despite adding a vital functionality to the decentralized ecosystems Ethereum & co. didn’t solve the main flaws of classical blockchains – scalability and interoperability.
So just recently we witnessed the emergence of the next level (3.0) of blockchain, whose purpose was to fix those issues. The most prominent examples are Cardano, IOTA, Nano... These and other similar projects are still struggling to fulfil their mission.
Since the blockchain 3.0 revolution is still on its way, it could be too early to think about 4.0. But everything happens very fast nowadays...
Decentralization on autopilot
Most experts believe that blockchain 4.0 could solve the ultimate question for every new technology: mass adoption. In fact, the paradigm shift we are talking about here will take place only when mass adoption of real-life decentralization technologies actually occurs.
Essentially, blockchain 4.0 should have everything the previous iterations had, plus the ability to demonstrate sufficient utility so that people and businesses actually use it en masse. There are still debates about which technological innovation will bring blockchain to that level.
Many believe it will be AI.
Thus, Tesla is going to transform the world as we know it with self-driving cars (and spaceships?), the same way Velas Network – a Swiss-based ecosystem startup – is aiming to transform the world of finance and beyond with its AI-powered blockchain technology.
Velas is a decentralized ecosystem for smart contracts, dApps and more that runs, essentially, on autopilot – AI-enhanced Delegated Proof-of-Stake dynamic consensus powered by distributed self-learning neural networks, eliminating possible human error as much as possible. This innovation should help Velas solve the blockchain trilema: ensure scalability (mass adoption can’t happen without it) while maintaining both security and decentralization.
The right conclusion
The current pandemic is not the issue here. The real underlying issue is our ability (or inability) to evolve and adapt. A virus – or any other natural or man-made disaster – can destroy humanity, but only if we won’t draw the right conclusions from the past and present, and take necessary and timely actions in order to proceed to the future.
Decentralization is not the ultimate answer, of course. And for sure, we inevitably have to preserve a degree of centralization in various aspects of our life. But the time is right to embrace decentralization more wholeheartedly. This way, we will become even more effective and invulnerable as a species. We have all the tools and technologies at our disposal to achieve this outcome, and perhaps the cataclysmic events of recent months provides the required impetus to move in this direction.
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