As institutional capital invests more into digital assets, a number of crypto players fear that the original promise of decentralization is losing out to the influence of Wall Street.
Although exchange-traded funds and large-scale custodians facilitate liquidity, they also prompt doubts about whether permissionless networks will continue to be relevant.
Infrastructure vs. Usage
Even if a decentralized network is technically perfect, if it processes almost no volume, it will still be economically insignificant.
Permissionless protocols can, therefore, by cutting out the middlemen, lower the costs, widen the access to markets, and create composable applications that surpass the performance of legacy systems. Without a tangible level of usage, decentralization can be at best an ideology and at worst, a non-existent business model.
Also Read: Ethereum’s Vitalik Buterin Explains How Decentralization Can Protect Global Progress
Economic Edge
Among their various economic advantages, centralized platforms mainly leverage control of the transaction process to extract rent, resulting in the creation of very high margins, which they are unwilling to upset.
Uniswap is an apt illustration of decentralization gaining favour with the public. It essentially took volume from existing exchanges and proved that decentralization can indeed gain market share if it delivers very clear cost savings.
Venture capital increasingly backs the projects that threaten the incumbents’ revenue streams, highlighting that investors put a higher priority on the economic impact than on the technical novelty of a project.
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Governance, Censorship Resistance, and Resilience
When a protocol is able to secure real economic activity, it is then that its features of secondary nature get a chance to shine. Resilience is also a very real feature of permissionless networks, which are able to absorb volume during stress events, as was the case when some staking providers were still able to remain online during major cloud outages.
Also Read: Hyperliquid Founder Boldly Rejects Venture Capital to Protect True Decentralization