Ask HN: When is federation a better solution than decentralization?

The past couple years have been dominated by the hype cycle of cryptocurrencies as an incentive mechanism for decentralization. Hundreds of “N sided marketplace” problems have been reframed to fit within decentralized solutions. And yet, none of them have really succeeded. There is no “killer app” representing the decentralized marketplace du-jour.

I can’t help but wonder if many of these projects are approaching the solution the wrong way. The fundamental problem underpinning decentralization is one of governance and direction. Too many cooks in the kitchen means solutions can become diluted with unnecessarily indirect incentive mechanisms.

Decentralization is a spectrum. There is a middle ground between a decentralized solution and a centralized solution. That middle ground is federation.

To me, federation has always seemed a better solution for decentralized marketplaces than full decentralization, because it decouples economic incentives from those of technology suppliers. As long as we live in a world where fiat currency and nation states dominate transactional and regulatory environments, it is unavoidable that any large enterprise pursuing legitimacy will need to interact within the bounds of laws and regulations. Given that, it seems that federation offers a better solution than decentralization because it allows service operators to define their own economic processes according to their own jurisdictions and regulations, whereas decentralization is more of a free-for-all that can meet only the lowest common denominator of regulatory and economic restrictions.

What does HN think? Is decentralization overhyped? Would many projects be better suited to a hybrid model of decentralized infrastructure and federated transactions?

Decentralized infrastructure with federated transactions describes many successful technologies such as email.

I think federation is just a design tool meant to solve a specific problem, much like decentralization, programming language choice, data structures, etc are more concrete software engineering ones.

I agree with you on that hybrid would be a more sustainable solution.

I want to highlight a technical perspective. That’s the scalability issue of Blockchain. Fully decentralization cannot afford scalability, just as we cannot afford referendum on every polical proposal.

In fact, many technical solutions to scale the Blockchain are using the same principle of your idea of federation.

About federation in particular: Moxie wrote about why Signal is unfederated a little while back: https://signal.org/blog/the-ecosystem-is-moving/

It has some interesting insights into when federation works and when it doesn’t.

“Nothing about any of the protocols we’ve developed requires centralization; it’s entirely possible to build a federated Signal Protocol-based messenger, but I no longer believe that it is possible to build a competitive federated messenger at all.”

Decentralization is when you need to hide something. Torrent, etc.

Decentralization did not work for Napster.

Decentralization is not a magical trick.

Money, specialy when he come to your retirement are better centralized. Because it's for your own security, gouvernement to don't let you starve.

Decentralization for money only mean, no security, no rules, nothing. Like a punk anarchy.