(Industry) The Decentralized Future isn’t Ready

Kent Dahlgren
12 min readFeb 22, 2021


Article summary: the “decentralized” version of the dotcom boom and crash is still a few years out. This article explains why.

Beware if you see a marketing campaign that features this kind of art: they are likely peddling nonsense

You may have seen the videos; an upbeat tune, and a happy narrator touting a sunny future, featuring a re-write of the Internet that renders everything decentralized and almost free.

Pure utopia!

Generally speaking, these promoted business models are supported by sales of a cryptocurrency within the context of something called an initial coin offering, or ICO, which is something like a deregulated IPO, intended to capture investment money from normal folks.

I believe the ICO / cryptocurrency business model will not prove viable until several gaps are addressed, which will occur as the market matures. At the present, the market is still in its infancy.

Summary of factors to consider as you monitor the market as it evolves and matures:

  1. Insufficient investor trust in the crypto/ICO model
  2. Insufficient regulatory oversight
  3. Marketing still emphasizes the “how” and overlooks the “why”
  4. Too few examples of “first steps” that most people understand
  5. Mixed mode use of crypto: both as currency and for investment purposes
  6. No true “early adopters” of substance
  7. Software does not yet truly qualify as “open source”

Before I get to a detailed discussion of each, let’s begin with a couple of baseline assumptions, just to establish context:

  • The crypto equivalent of the “dotcom” crash has not yet occurred
  • It’s going to take time for decentralization to be widely-adopted

The crypto equivalent of the “dotcom” crash has not yet occurred

There’s plenty of people who believe that the “crypto-winter” of 2018 was the cryptocurrency equivalent of the 2000 “dotcom” crash, and they watch each spike in Bitcoin value, believing it’s the modern equivalent of the boom that ushered in a mainstream adoption of ecommerce and Internet-based businesses.

They are incorrect, and here’s why: the dotcom crash of 2000 was followed by market consolidation around customers and technology.

2018 was ugly.

But no such consolidation occurred in 2018. Why not?

In 2000, larger firms snatched up the many smaller floundering “dotcom” companies, and consolidated the market around functional intellectual property relied upon by a solid base of actual customers.

Think back and remember how many established companies were able to rapidly pivot into ecommerce through acquisition of a “dotcom” start-up.

In many ways, the “dotcom crash” represented a market correction, and over time the market value of the publicly-traded firms began to reflect the perceived competitive value each firm represented, as quantified through revenues, unique customers, and so on.

The crypto winter of 2018: no such event occurred, because there was no basis of consolidation.

What was left were many examples of insufficiently evolved business models, immature technology, functionality without any demonstrative customer utility, and therefore not enough actual customers around which any company would consolidate.

No customers, no revenues: and therefore no consolidation.

At the time of this article’s publishing the value of Bitcoin was $55,000

Note: I’m not talking about the purely speculative investment in cryptocurrencies such as Bitcoin.

Consider a person investing in the stock of a publicly-traded company: when they invest, they are indicating a belief that the company has competitive value.

But when someone invests in Bitcoin, they do so for completely different reasons.

Although the Bitcoin currency has a decentralized technology (a blockchain), its only functional purpose is supporting the Bitcoin currency. Investment in Bitcoin is not an investment in a business; it’s based upon the hope that one can profit from currency exchange rates, which is akin to investing in Euros, relative to the US dollar, to leverage clumsy metaphor.

Of course, there’s Ethereum (which is another and very commonly-used currency), and while its blockchain is far more evolved: an investment in Ethereum is almost always based upon the same calculus: purely speculative purposes.

And more to the point: this article emphasizes the technologies and businesses practices that will follow a truly decentralized economy, which is adjacent to the speculative realm of crypto that currently exists.

There will be no market consolidation until there’s a sufficiently advanced technology and services offering that attracts, retains, and grows a base of paying customers.

It’s my projection that the crypto allegory to the dotcom bubble and the resulting crash is about 3–5 years out: by around 2025. We’ll see if I’m correct.

It’s going to take time for the decentralization to be widely-adopted

“The cloud” has been around since the 1950’s. Did you know that?

As I wrote in this article, it’s taken 60 years for “the cloud” to be widely adopted.

People think that “the cloud” is some new innovation, and because they don’t understand it, they believe it means that data and computation are magically “on the Internet.”

In fact, a huge percentage of data and computational resources are deployed in a hybrid manner, some of the infrastructure managed locally, and some rented by huge, centralized entities such as Amazon.

Again, “the cloud” has been around since the 1950’s.

Sure, it’s adopted today, but it took decades and even today not all of it is “on the Internet.”

Many tech enthusiasts that are proponents of decentralized technology incoherently use Moore’s Law to promote their claim that adoption will be “exponential,” without understanding how inapplicable this example is.

Moore’s law is the observation that the number of transistors in a dense integrated circuit (IC) doubles about every two years — the metaphor is not applicable to the adoption of new business models. As it pertains to decentralized technology, the use of Moore’s Law to encourage early adoption of decentralized technology is erroneous and inapplicable.

Watch for a maturation in these seven areas

What needs to be addressed before the crypto/decentralized market is ready for prime time?

(1) Insufficient investor trust in the crypto/ICO model

I really don’t want to get too far into this topic of ICOs, because it’s a bottomless pit, but here’s a high level overview:

The traditional model for investing in new technologies is one where opportunities are typically limited to a small number of deep pocket investors. The “initial coin offering” model was developed to fix this.

Enthusiasts of the ICO claim that it makes it easier for the ordinary citizen to invest in companies created by ordinary people just like that.

Within the realm of the ICO world, the ultimate bad guys are the SEC, and there’s a lot of words said about how their regulations only serve to inhibit innovation.

Of course, the SEC exists to protect people from being scammed, and if ever there was a domain that could use some SEC oversight, it’s the ICO world.

This article touches on some of the reasons why.

(2) Insufficient regulatory oversight

This particular position is extremely unpopular among crypto-enthusiasts, but they are eager to avoid a conversation that needs to happen:

The ICO model for fundraising is famously plagued with fraud.

You can expect a crypto-enthusiast to complain about the evils of KYC, or “know your customer,” which is how you can be sure that people aren’t obfuscating their identity.

Why does that matter? For one, it’s critical that we know who might be attempting to launder money on behalf of criminal enterprise or rogue nation states. Also, a verified identity is an important investment in reducing fraud in marketplace transactions.

In time, expect the SEC and other regulatory bodies to evolve regulations and standards in this space, to ensure that people are better protected from fraud and exposure criminal enterprise and rogue nation states.

(3) Marketing still emphasizes the “how” and overlooks the “why”

A “tell” of an insufficiently mature market is how much the messaging is dominated by the language of engineers, who tend to fixate upon “how” things work, rather than “why” it matters.

For example, it’s claimed that the technology for “decentralized” solutions is “web 3.0” and therefore about as cheap and modular as using Legos.

This is false, on about every level possible. It’s pure marketing, and more to the point: it’s not the right point to discuss.

Consider the following summary (in Forbes) regarding Web 3.0 and you’ll immediately understand how many years we are from realizing this promoted vision:

In sum, Web 3.0 will bring us a fairer internet by enabling the individual to be a sovereign. True sovereignty implies owning and being able to control who profits from one’s time and information. Web 3.0’s decentralized blockchain protocol will enable individuals to connect to an internet where they can own and be properly compensated for their time and data, eclipsing an exploitative and unjust web, where giant, centralized repositories are the only ones that own and profit from it.

A properly mature solution is one that’s rooted in “why” it matters to a specific person. This person should not care “how” something works; this is beneath their dignity or concern.

Beware a market that’s dominated by those who speak primarily about “how” things work. It’s not interesting, important, and indicates the offering’s low market value.

(4) Too few examples of “first steps” that most people understand

The promise: nearly free apps, completely decentralized! No implementation plan necessary, because it’s Web 3.0!

The pitch for almost all ICO-based firms is one that talks about a sunny future where the Internet is completely re-written, and no longer are a need for “evil” centralized institutions such as governments, banks, etc.

Apps are free, and we are no longer dependent upon the US dollar. Web 3.0! Like Legos!

Here’s my issue with any technology or business model: how do we get from here to there? What’s step one?

In other words: what are the precise intermediate steps which walk the market from where it is today to this imagined future?

It’s a decent question, but one that’s consistently brushed away.

How do we get from here (with zero users of your product) to an imagined future where the entire infrastructure is decentralized, people use your internet coin instead of the US dollar, and apps are basically free?

I recommend sticking to this question: a solution offering without a coherent adoption plan is insufficiently mature; nobody jumps from zero to a fully-realized vision in a single step. Things have never worked that way.

(5) Mixed mode use of crypto: both as currency and for investment purposes

Some projects promote the use of their currency within the app, and they encourage investors to purchase their currency for purposes of investment.

This introduces a mixed mode use of a currency; some are trying to use it as a form of currency, and others are using it for investment purposes.

Why is this a problem?

As soon as the currency goes up in value, people sell it, hoping to maximize their investment portfolio.

This results in a crash of the economy, and from the perspective of the person trying to use the currency: they can’t predict its value from day to day.

Imagine a $20 bill that’s worth $300 on Monday, $1.80 on Tuesday, $55,000 on Wednesday, and $22 on Thursday.

In the context of such wild volatility, you will not use this $20 bill for purchasing goods or services. This is the byproduct of an insufficiently diversified and stabilized economy, and why you cannot mix modes with currency without a coherent implementation plan that factors for these conditions.

This is why people like the US dollar, by the way: for all its faults, there’s no such massive swing in value each week.

To remedy this problem the crypto-economies must become diversified to the extent there is low variability, and this goes back to my original question: how do we get from here to the imagined future?

There needs to be a plan for how to grow the use of the economy, while diversifying it so there’s limited variability / volatility.

Chances are you’re going to need to adopt a hybrid model that includes fiat currency.

Why? Because you’re going to need normies. The crypto enthusiasts aren’t going to help you, and in fact will work at cross purposes, because their primary interest is turning a profit by playing the currency exchange market.

(6) There’s no true “early adopter” community, and no true user base of substance

By definition, an early adopter is someone who will pay any price for a product or service, just to boast the status. Definition of an early adopter:

The term early adopter refers to an individual or business who uses a new product, innovation, or technology before others. An early adopter is likely to pay more for the product than later adopters but accepts this premium if using the product improves efficiency, reduces cost, increases market penetration or raises the early adopter’s social status.

There are almost no actual early adopters in the crypto world, explicitly referring to decentralized solutions, but there are a sizable number of crypto investment enthusiasts, and their engagement creates confusion.

What’s the difference?

An early adopter is the kind of person who would pay $1,500 for a new smart phone, for the purposes of securing bragging rights.

By contrast, the crypto investment enthusiasts are commonly micro-investors who hope to monetarily benefit from increased speculative investment in the venture.

See the difference?

The early adopter is all-in for the product or service.

The crypto early enthusiast is all-in for the promoted vision, because they are actually investors.

This nuance becomes further muddied when crypto investment enthusiasts are rewarded as ambassadors through the “payment” of cryptocurrency, which is tantamount to a bribe.

“We are seeking ambassadors! We’ll give you 100,000 buckycoins, and if buckycoins follow Ethereum’s trajectory, you’ll be a millionaire!”

Therefore many crypto investment enthusiasts are bribed into leveraging their trust capital to encourage others to either adopt or invest in the venture.

You can probably see how this creates conflicts of interest, and serves as one of the biggest reasons why people have little trust in the ICO method of investing; who can you trust?

This is further muddled when you consider how many “crypto-journalists” were gifted vast quantities of cryptocurrency, again: tantamount to a bribe, used to secure the loyalty of a journalist, who is now financially compensated to cover up any accusations of fraud or abuse.

(7) There’s no true open source community — resulting in high maintenance costs

Did you know that fully 85–90% of a software product’s TCO (total cost of ownership) is maintenance?

TCO (total cost of ownership) is the cost of acquisition plus the cost of maintenance, over the life of the product.

Why does that matter to you?

A product that’s not maintained soon develops security problems, performance limitations, and soon becomes unstable.


Because software evolves constantly. If you’re deploying on a mobile device, you can count on Apple and Google to continue updating their operating system to reflect an eternally evolving world.

Here’s where it gets tricky: people don’t understand what it means to be open source.

Open source software is provided for use, and theoretically maintained by the community.

See the nuance?

If there’s almost no actual users of the technology, then the tech itself is little more than speculative, “proof of concept” quality (which is current state among so-called decentralized technologies), and if the community is not maintaining the code, that means you will have to.

As CTO for Bitnation we chose to use various “open source” libraries to expedite development of our product.

Most of them were posted in “open source” format, but almost none were being maintained, so we had to staff expensive engineers to re-write some core functionality, just to get the software to work.

And because the code was “open source,” we had to share what we’d written back to the community…which meant that we needed to now pay someone to maintain the code, used by the community.

Result? Extremely high maintenance costs. In my experience, about 30x what was originally projected; a show-stopper in terms of budgeting.

What’s going to happen is a more pragmatic hybrid approach, where the technology used to introduce “decentralized solutions” are a mix between mainstream technology and a step-by-step adoption of those technologies generally referred to as “‘decentralized.”

For example, what’s needed is a truly decentralized communication fabric, one that’s peer to peer, so if someone “shuts off access to the Internet,” communications between individuals can still occur, including financial transactions.

A great technology for this is the Libp2p stack, which turns all application-layer protocols into transport protocols.

Sadly, we learned first-hand much of the Libp2p stack is not ready for prime time. It’s not that it doesn’t work; it’s that too much of the stack necessitated re-write in a low-level programming language to work for our purposes, which means that from the perspective of managing a technology portfolio, the operating and capital expenses for the stack are now about five times what might normally be the case if we could rely upon a properly-mature and maintained open source stack.

This takes time and necessitates a number of consistent users: a real chicken-and-egg proposition.

In summary

Give it time; the variety of technologies currently known as “decentralized” will significantly augment and mature the Internet as we know it.

But as with all things: this will take time, and the first step is an industry recognition that the customer comes first.

Begin with the who, and then invest in understanding the why.

Cart before the horse: how something works should never dictate why it matters.



Kent Dahlgren

Product management fix-it guy. World-famous people skills. Extremely small hands. (edit) marketing lady says I’m also supposed to say “CEO of software company”