In Decentralized Companies, Everyone Has a Stake

By Ali Ayyash, Co-Founder at Beetoken (2017-present). Originally published on Quora.

In the summer of 2017, Equifax — one of three nationwide credit-reporting agencies that track and rate the financial history of consumers — suffered a massive security breach that exposed sensitive information of up to 143 million Americans.

What this breach revealed is, when centralized companies like Equifax own your data, they can manipulate it in any way — and in the process subject it to potential danger and theft.

But here’s where blockchain comes in: the Equifax data breach could have been prevented if that data had been encrypted and managed by a decentralized company that stores data on a blockchain.

Blockchains use cryptographic hash functions that both encrypt your data and keep track of historical changes to it. So at any point in time, if any piece of your data is tampered with, you yourself can immediately determine where that tampering happened — and work to ameliorate the damage.

But security is not the only reason that decentralized companies are preferable to centralized ones. Decentralized companies also incentivize good behavior among their respective communities and operate more efficiently.

That’s because in decentralized companies, everyone has a stake — from the founders to the folks on the ground.

That’s something we kept in mind when building Bee Token.

Bee Token is a decentralized home-sharing network built on open Ethereum protocols and powered by Bee Token’s own utility token. What this means is that everyone in possession of our token — from the founders to the guests and hosts — owns an aspect of the platform. It’s a digital asset. Likewise, all users can track both how their data is being used and how it’s being protected.

Now, in any company — especially those in the sharing economy — there are bound to be bad actors. But in decentralized communities, bad acting is actively disincentivized. That’s because if the company does well, all the stakeholders benefit.

Let’s compare Bee Token to a centralized home-sharing company: AirBnB. At AirBnB, all investment in the health and success of the company resides entirely with the founding team and early investors. The decisions made are inspired solely to maximize the profit for those people. The leadership team is also in complete control of the data AirBnB collects, which means they can choose to use it or monetize it however they want.

Homeowners, meanwhile, have no stake.

There’s a similar case with Uber. Uber drivers have no stake in Uber’s ultimate success. They in turn have no larger incentive to act in the company’s best interest, because everything the company generates benefits only those at the top.

For this reason, decentralized companies are simply more trustworthy.

Game theory suggests that one can trust a group of people and the collective decisions derived from their consensus, but one should not trust the decisions of an individual person.

Decentralized companies operate in accordance with this same belief. Even though you might not trust one person who comprises a block of a larger blockchain, you can trust the chain as a whole.

Consider the way centralized companies like Facebook or Google control your data. Users on those platforms currently have no way of knowing how their data is being utilized or whether it’s being accessed by third parties — like the NSA, for example. This is because Facebook and Google control that data centrally and can, hypothetically, allow government agencies or other third party actors backdoor access.

Decentralization disallows this.

While it is true that bad actors or companies can try and manipulate the data stored on a blockchain, it is impossible for them to do so without being noticed. And once such actors are caught doing something like this in a decentralized community, the community has the power to take them down, which also disincentivizes bad actors from following through on their malicious intent.

In my experience, I’ve also found that decentralized companies operate more efficiently.

Centralized companies designed with strict hierarchical structures are like hulking cruise ships: their direction is determined by a specific group of people situated at the top of the company, and any changes in direction by definition happen slowly and clunkily.

Innovation in such companies is nearly impossible to actualize. By the time decisions are made and changes to a product or tool are actually implemented, the user who is supposed to benefit from the change might not even need it anymore.

Big, centralized companies have little ability to adapt and almost no ability to communicate between ranks or act quickly to meet smaller needs. I’ve spent much of my career in such companies. I know this from experience.

In decentralized companies, however, the hierarchical structures are much simpler and incentives are more purposefully aligned, so improvements happen when they’re needed, and products are released more quickly. The focus in such companies is on the results and on genuinely improving the experience for the users benefitting from your product or idea.

Here’s something of a bottom line: whether you agree with me or not, the shift to decentralization is already happening.

As part of his New Year’s resolution, even Mark Zuckerberg announced a commitment to decentralize aspects of Facebook.

Plus, more and more decentralized companies like Bee Token are becoming real players in their respective industries, such as home-sharing.

The ultimate reason is because decentralization is simply better for the users — the people on the ground who comprise our consumer communities.

As more and more community members see the difference between centralized companies and decentralized companies — the more they feel the difference, both in terms of security and aligned economic incentives — the more they will begin to demand this new model.

By Ali Ayyash, Co-Founder at Beetoken (2017-present). Originally published on Quora.

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