# Decentralization is why we fight for crypto

Source: https://www.coindesk.com/opinion/2024/12/17/decentralization-is-why-we-fight-for-crypto

Digital asset laws should enshrine decentralization standards, helping to guard against volatility, scams and casino culture, says a16z’s Miles Jennings.

Updated Dec 20, 2024, 1:25 p.m. ESTPublished Dec 17, 2024, 9:51 a.m. EST

The last four years were focused on fighting for the survival of the crypto industry in the United States. Against a hostile administration and unprecedented lawfare, the industry fought back boldly – and won.

But now, the industry faces a more pressing task: Helping to shape the legislation and policies that will govern it for decades to come. At the core of this fight is the issue of “decentralization.”

Put simply, decentralization is the distribution of control and decision-making, eliminating the need for a central authority – ensuring more choice, transparency, security, and resilience for users. While it may sound technical, decentralization is the core premise of blockchain technologies. The benefits of decentralization include promoting competition, creativity, and collaboration while protecting freedom and value – both financial and reputational.

But why should decentralization be enshrined in law? By adopting policies that incentivize it, we can ensure three important outcomes:

First, we can guard against the big, centralized companies – from Big Tech, Big Finance, and Big Entertainment – entrenching their dominance in the burgeoning blockchain ecosystem. As we’ve seen across internet, banking, and entertainment networks, centralized control has led to consolidation and value extraction to the detriment of the people who use those products. The next iteration of the internet should focus on uplifting those in Little Tech, because the world needs more options, not the same few options.

Second, we can ensure founders and builders are rewarded for giving up unilateral control and for creating systems that function more like public infrastructure, and less like proprietary technologies. The internet rapidly evolved because entrepreneurs could build on top of shared, open protocols like email and the web. Blockchains unlock a similar, but even more expansive, world of possibilities.

Finally, we can protect consumers and promote long-term investment and building. Minimum standards of decentralization would push digital assets to function more like commodities than securities, helping to guard against volatility, scams, and the casino culture of pump-and-dump schemes – without stifling innovation. While this could be bad news for crypto hedge funds and day traders, it would be great news for those looking to build useful products on blockchains.

Without these three incentives, the allure of centralization is too powerful for builders. Even though blockchains now make decentralization more technically possible and easier to implement at scale, it’s still far too convenient for builders to make unilateral decisions, rather than build consensus; and it’s tempting to hoard profits for a few, rather than distribute them among a community.

So how do we incentivize decentralization?

We need a new “fit for purpose” regulatory framework for decentralized technologies like blockchains – one that isn’t predicated on the existence of centralized intermediaries, the way securities laws currently require. Such a framework could incentivize decentralization by reducing regulatory burdens; and by enabling broader market access for projects that both disseminate ownership and control as well as provide tailored disclosures.

This approach is not new – it builds on the SEC’s 2019 Framework for Digital Assets – but it also solves one of the key paradoxes that framework had introduced. The framework sought to mitigate risks to users by limiting reliance on centralized actors. But, it also incentivized projects to obfuscate their ongoing development efforts – or to even abandon work altogether – exposing users to significant risks.

By reframing decentralization in terms of control – and combining control-related decentralization requirements with disclosure requirements – this new regulatory framework would empower founders to build decentralized technologies, helping them resist the convenience and ease of centralization. And it would do so without exposing consumers to the risks securities laws aim to address.

This approach would also be malleable enough to evolve as the industry grows. It therefore fosters innovation, accelerates the progress of decentralized technologies, and enables the crypto ecosystem to thrive in the U.S. over the years to come.

There will obviously be pushback from those in the industry looking to advance their own agendas and gains – but let’s not lose sight of the benefits of blockchain technologies, not just for crypto users, but for all.

If we win the battle for decentralization, we can defend the purpose of crypto.

Note: The views expressed in this column are those of the author and do not necessarily reflect those of CoinDesk, Inc. or its owners and affiliates.

## Comments

**mishaderidder.eth**: > So how do we incentivize decentralization?

Incentives will only get as far as the incentives go, but how do you really motivate for decentralization? People should be deeply convinced it is absolutely necessary. Hope Kiwi can educate a bit :)

**tudorizer.eth**: Another fluff piece about walking the walk, but not talking the talk. 

@mishaderidder.eth, rightly so. Incentives are fun, but fundamental decisions and systems designed to not collapse in oligopolies are "funner".

**macbudkowski.eth**: Tbh having a solid law supporting decenetralization would be useful, especially in the US where lawyers are expensive. I've heard from some a16z friends that a big part of the startups' raised capital goes to legal fees which is pretty absurd. 

**tudorizer.eth**: @mac, you do not want to know how many tens of Ks my startup paid in lawyer fees to incorporate and to shut down. Almost 2 months of runway down the drain.

**macbudkowski.eth**: Sorry to hear that! 

Speaking of law adding friction to running business, I once heard an anecdote from the director of the Polish Embassy in the US. 

Once he became responsible for business affairs, he received many complaints from Polish companies operating in the US. They said they were constantly sued for no reason, which discouraged them from opening US offices.

So the guy went to the US officials to solve the problem. He recaped the complaints he heard, and the officials listened carefully. After he finished his last sentence, they responded:
"So why do your companies have such a small legal budget? If you want to run a business in the US, you can't save on lawyers"

**tudorizer.eth**: @mac, oh wow. Cold and accurate. 

US tech bros make fun of the europoor, but aren't mandatory lawyers and insurance another word for tax?

**macbudkowski.eth**: 100%. I think smart contracts might leapfrog some of these old laws and reduce the tx costs from high legal bills to low gas fees. 

Of course, it would only work for some types of transactions, but it is pretty amazing that Aave can serve thousands of people globally without signing any paperwork and without adapting the T&C to each jurisdiction's law.

Re: Europoors, I was once wondering what's the real disposable income in the US once you deduct lawyers, insurance, private schools (since public schools suck) for kids and so on. Haven't found any data on that but that might be interesting.