An Economic Perspective on Internet Centrality

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March 9, 2023

However, we are simultaneously seeing the evolution of use cases (such as certain IoT deployments) that apparently cannot work (or work poorly) in centralized deployment scenarios. So, if centralized systems are supposed to have all these intrinsic problems when they attempt to grow to the size of the global Internet, why is the Internet completely dominated by a small collection of global behemoths? Why are these giants able to defy this reasoning that scale and decentralization are meant to go hand-in-hand?

Is it because we have been working on the wrong protocol base for the network? Is it some supposed paucity of robust decentralised technologies that inhibits this decentralization and the associated emergence of diverse service operators? Do protocols such as HTTP or routing protocols lend themselves naturally to centralised operation by a small number of large-scale operators? Should we take Web3 seriously? Can the dominant position of Google, Microsoft, and Amazon be attributed to the HTTP protocol? Or the DNS? Could this situation be ‘fixed’ by turning to blockchain-based names and the Web3 framework? Can we find the root cause of centrality in the protocols we use?

The acute centralization at the upper levels of the network protocol stack has sucked most of the oxygen from everywhere else and concentrated the vast wealth of this sector into the hands of a few global behemoths. But they do not sustain their globally dominant position by employing millions of workers. They have not commandeered such vast amounts of capital that no other prospective competitor can enter the market space. They do not have the traditional control over physical and capital resources that were the previous essential elements of a monopoly. The traditional barriers to competitive entry do not exist here.

Via APNIC Blog