Decentralized future for technology and business models

Data and computing have moved to a centralized model during the last decade when many services have gone to the cloud. This trend continues, and we will see many more companies go to the cloud. At the same time, we are starting to see a new trend toward more decentralized models. But it is still a combination of different things. It might look like fuzzy development, but it really happens.

There are several reasons why we will see more distributed models for data and processing overall in the future. We can divide them into three main categories:

1. Technology reasons. Many services (for example, self-driving cars, smart homes, personal assistant apps) require minimal latency and availability of services all the time, and some data and processing must be local.
2. New business models. Blockchain-based token models open new opportunities to monetize distributed solutions. There is no need to process and charge services in one central place, opening opportunities to many new business model innovations.
3. Data protection and privacy requirements. Data is becoming a liability for companies, and they want to find better models to use data with a lower risk. Consumers will have services to utilize their own data fully.

I have often said it is not hard to predict the future, but it is hard to know the right timing. It is also the case for this development. There are so many good reasons to have more distributed services that it will happen. But it is not easy to say how it will happen, where it will really take off and how long it will take.

We now see several technologies that make this development real. First, we have Edge that comes into effect with 5G networks. Edge keeps data and processing closer to actual users. The challenge – are network vendors and telecom carriers the right parties to deliver these solutions when Internet giants like cloud vendors now dominate services and service development?

Secondly, we have blockchain, distributed ledger and token models. These are all developing rapidly, but they also have their challenges. It is not easy to say which technology can survive the longest. In this case, it is not only the technology but also the transaction data in those chains that must survive, making it difficult to make decisions about a particular technology. At the same time, these will challenge centralized platforms, as they offer totally new ways to distribute and monetize applications and data.

Thirdly, decentralized solutions can be implemented inside existing cloud solutions. We, of course, have regional cloud instances, but clouds enable other ways to decentralize services. For example, each user can have their own cloud services to use their data and run their own applications. Then, for example, with token-based charging models, they can also pay for using apps locally.

Of those three technologies, Edge has many challenges as it needs totally new infrastructure and applications to take advantage of it. It is currently much easier to make decentralized services by utilizing the current cloud infrastructure. But longer-term solutions can be another story. Technology disruption often attracts new companies that disrupt business. For example, Amazon and Google are tied to centralized models. Can they adapt when decentralization starts to happen and other vendors offer the latest solutions?

We will likely see two different development tracks for decentralized solutions. The first one being distributed and decentralized applications. This starts with the existing infrastructure and builds distributed solutions, such as a user’s own data cloud and application service. This track already has applications. Then we have the second track to develop a more decentralized data and processing infrastructure. This will take a longer time, but it can fundamentally change the structure of the Internet.

We are definitely moving to more distributed services. Thousands of startups are already developing services, data models and applications. Big technology vendors are investing in Edge type models, millions of people are trading cryptos, and forward-looking investors, like Andreessen Horowitz, are making big investments. At the same time, regulations are putting pressure on making new data models. The exciting part will be to see how it will happen, and the parties that make it happen will be the big winners.

The article first appeared on Disruptive.Asia.