If there is an original sin of blockchain technology, it is this: it has never been sufficiently decentralized to live up to its promise. What’s the point of having an alternate way to structure an economy or industry – where users interact directly with one another rather than with a corporation or government -- if those services run through a handful of centralized gatekeepers like Amazon, Google or Apple?

I’d like to dive into this thorny issue with an analysis of a recent critique of web3 and its lack of decentralization before turning to an effort by startup Livepeer to build a peer-to-peer network for video streaming that could be seen as a step in the right direction.

This well-known predicament of too much centralization in crypto was brought to light most recently by a cogent analysis of web3 by Moxie Marlinspike, the outgoing chief executive officer of the encrypted messaging service Signal. I’ll do my best to summarize Moxie’s argument but if you haven’t already you should read it in full.

Moxie raised several thoughtful points about centralized services that have come to dominate what is supposed to be a decentralized finance, or defi, world. He described the beginning of the Internet as web1, where services were decentralized and people ran their own servers and web sites, for example. Then web2 saw the emergence of consolidators who centralized everything – think Facebook, Amazon ect. Web3, in Moxie’s view, is meant to “give us the richness of web2” but decentralize it, he wrote.

To prove his point, he described his experience making two decentralized applications, or dApps, and a non-fungible token, or NFT. Yet to create a dApp that interacts with a blockchain like Ethereum, one has to host it on a server given that you can’t run a blockchain node on a mobile device and it’s quite difficult to do so on a web browser. Two firms, Infura and Alchemy, dominate this backend server infrastructure for dApps, Moxie pointed out. No decentralization there.

After he created an NFT, Moxie detailed how the marketplace Open Sea removed it without warning. He implied, but didn’t state, that this could’ve been because he designed his NFT to look differently based upon how someone viewed it. On Open Sea it looked like a circle made up of lines, on another NFT market, Rarible, it looked like a somewhat circular wave pattern, and if you viewed the NFT in your wallet it looked like the beloved pile-of-shit emoji with eyes.

source: Moxie Marlinspike

Point being, most NFTs don’t interact with the blockchain. Instead, their code that’s stored on the blockchain holds a web address that points to a location off the blockchain where the digital art or music file – ie, the NFT – exists. But when Open Sea removed Moxie’s NFT from its market, it also disappeared from his wallet as well.

“This is web3, though, how is that possible?” he asked.

A wallet like MetaMask has only a few functions –to hold crypto balances and NFTs as well as interact with smart contracts. Yet wallets aren’t meant to interact directly with the blockchain because they are used on mobile devices or web browsers – the same issue dApps face, as Moxie put it. So what MetaMask does when you ask it to display your NFT is it calls Open Sea to get the information. If Open Sea has removed your NFT, then it’s as though it never existed. Again, this is not the decentralized utopia many blockchain pioneers have promised. Dan Finlay, a MetaMask founder, wrote a good response to this criticism.

This is all fair from Moxie so far in my view, but it also misses a large point.

Web3 has always been the most ambitious and most difficult prize sought after by blockchain developers. It’s a reimagining of the current Internet that does away with user data being sold to the highest bidder. It stops services like YouTube being able to kick off programming it doesn’t like, which just happened this week with the Bitcoin Magazine YouTube channel. It gives back privacy and permission to its users.

But to dismiss it at this point is far too harsh. It also distracts from the real innovation that has come from blockchain tech, like a new way to raise capital without a bank or venture capital firm (the initial coin offering market). Or a new way to obtain collateralized loans or earn interest on your assets without a bank being involved. The latest innovation – NFTs – solve the incredibly tricky issue of authenticated digital provenance (albeit with some work to do, as mentioned above).

But that’s the point. NFTs have only gained prominence in the last year. To kick the tires on them and claim they just won’t do is far too rash in my opinion. Let the tech grow, evolve and get better. Let’s see how the improved version of Ethereum changes the game. Let’s see how newer, faster blockchains like Polkadot, Avalanche and Solana put pressure on Ethereum. May the best tech win. But don’t call it a failure yet.

To that end, there are firms working toward be decentralized as a founding principle. Doug Petkanics and Eric Tang co-founded Livepeer in 2017 after having their own run-in with the web2 Goliaths Facebook and Apple, Petkanics told me by phone this week. The co-founders had created several startups previously, one of which, Hyperpublic, was acquired by Groupon. Their next venture, Wildcard, sought in 2013 to take desktop content that you might find on Facebook or Twitter and make it mobile friendly. At first they were able to write programs that interacted with those giant companies but soon they were denied access, Petkanics said.

Members of the Livepeer team

“We started integrating with them, working with publishers to sell them the service,” he said. “Then over time each of them closed off or they stopped evolving. They stopped letting developers push in. Eventually they went directly to the publishers themselves and built their own relationships and advertising platforms and we had no ability to push publishers’ content into their platforms.”

“We didn’t get to be part of this big new change we knew would happen,” Petkanics said. “They cut us off.” At the same time they had to create their own app for Wildcard, which won an Apple design award in 2015. But they soon ran into trouble.

‘This is a nightmare’

“Apple was a gatekeeper for distribution in that they’d hold our app out of the App Store for months on end without any clear communication as to why,” he said. “Combine these two experiences where we’re relying on these big tech platforms for our future success, and we were like, ‘never again, this is a nightmare. This is gatekeepers controlling our destiny and we’re not into this.’”

That ultimately led to the failure of Wildcard and Petkanics and Tang had to lay off their team and prepare to give investors their money back. Instead, their bakers said why don’t you look around for something else that’s interesting, he said. They discovered Ethereum in early 2016 and knew they could build on the blockchain without fear of a middleman getting in the way.

Enter Livepeer

Livepeer was born in 2017 to provide a decentralized way for video to be streamed over the Internet. Ethereum not only offered a type of freedom to build that they hadn’t encountered before, “separately, this lets you put economic incentives into open-source software. That’s really interesting to us. That’s a paradigm shift.”

They zeroed in on video because 80% of content on the Internet comes in video form, yet it suffers from a price bottleneck from corporate platforms like Amazon Web Services and Google. They each charge about $3 an hour to change raw video into a form that can be viewed on any device at any bandwidth speed, what’s called transcoding, Petkanics said. That might not seem like much, but a startup that wants to offer its users video functionality can soon find themselves having transcoding bills that threaten to bankrupt them.

“If you’re building a creator-economy application, a user-generated-content application, you’re letting hundreds or thousands of users all go live at the same time,” he explained. “Imagine you have a thousand people streaming at once on your Twitch-like site. That’s $3,000 an hour. That’s a lot of money, it adds up pretty quick to millions of dollars a week.”

Livepeer is seeking to change this by appealing to cryptocurrency miners who have extra capacity in their graphics processing units to get paid to use some of that to transcode raw video into a form that’s usable on any device, Petkanics said. And it’s not just miners, anyone with the desire can offer up their hard drive to help Livepeer transcode video so their network is distributed, peer-to-peer and not at the whim of a corporation. It also brings transcoding costs down for its users to about 30 cents an hour, Petkanics said.

So far Livepeer has seen a lot of growth in the last year. They measure it by minutes per week that their customers use. A year ago that was about 379,000 minutes per week. Now it’s about 2.4 million minutes per week, according to company data.

Livepeer is far from the only firm working toward a decentralized architecture. According to the Web3 Index, firms such as Arweave, Akash, The Graph and Helium are making inroads to providing services that don’t rely on corporate gatekeepers. Then there’s the InterPlanetary File System, or IPFS, that is a peer-to-peer data storage and sharing system.

Visit The Web3 Index here

Petkanics is cognizant that truly decentralized infrastructure has a lot of work to do, but is still making headway to creating a web3 experience that is free of gatekeepers.

Livepeer’s recent growth, “is a drop in the bucket compared to Twitch, but it’s pretty good for web3,” he said.