Decentralization & Interoperability

Key Takeaway:

Technological decentralization refers to the shift from centralized to distributed modes of production and consumption of goods and services. This trend is seen in various sectors like automation, social media, finance, governance, and transportation. Interoperability is crucial to decentralization, allowing for greater flexibility, convenience, and efficiency. Examples of the decentralization and interoperability trend include decentralized energy systems, decentralized finance (DeFi), and mobility-as-a-service (MaaS) platforms - all expected to expand until the end of the decade.

Trend Type: Technology

Sub-trends: Decentralization & Introperability, Virtual power plants, Clean rooms interoperability

April, 2023 • Less than 4 min read

Technological decentralization can be defined as a shift from concentrated to distributed modes of production and consumption of goods and services. In automation, for instance, decentralized systems are composed of modules designed to operate independently but capable of interacting with each other to meet the system’s overall goal. But decentralization can also affect how decisions to a common purpose are taken, distributing power and control away from a central authority or entity. In the context of the Internet, decentralization means building systems that are not reliant on a single entity or organization but instead operate on a distributed network of nodes, like peer-to-peer networks, open-source protocols, or distributed ledger technologies. In governance, it might imply code-driven Decentralized Autonomous Organizations or DAOs.
Most frequently, technical decentralization refers to Web3 (the Decentralized Web), built on open-source blockchain technology, a decentralized digital ledger of transactions that uses cryptography to secure and verify each transaction. The global Web 3.0 blockchain market size was USD 1.73 billion in 2022 and is expected to expand at a compound annual growth rate (CAGR) of 47.1% from 2023 to 2030, according to Grand View Research, Inc. (please refer to Web3 trend).
Since blockchain interoperability allows data and value to be transferred across different networks, it has become an increasingly important feature of Web3. Achieving it across all identity systems and blockchain networks without compromising security will be a fundamental future requirement, as interoperability may allow for the creation of powerful new products and services.
But there are other areas where decentralization and interoperability are visible like the decentralized energy systems. As the demand for renewable energy increases, grid stability concerns escalate and communities cope with surging energy prices – decentralized energy systems are rising. Historically, the variability of renewable energy generation has made it challenging to integrate renewables into the electricity grid reliably. Whereas conventional power plants can burn more or less fuel to account for changing electricity demand, renewable energy sources like wind farms and solar panels rely on weather conditions. Virtual power plants (VPPs) could help, and they’re quickly gaining momentum. These decentralized energy management systems aggregate power from a distributed energy resource network — such as residential solar panels, large-capacity batteries, wind farms, and more. Using a cloud-based system and deploying AI tools to manage what’s going where, these systems can make grids more resilient by constantly reconfiguring themselves to draw from wherever power is available, even as demand fluctuates. Investor, industry leader, and government interest in startups that support VPP management and energy storage have been increasing steadily, driving advances and competition in the space.
Another example of the decentralization and interoperability trend outside of the energy sector is the emergence of decentralized finance (DeFi). DeFi leverages distributed ledger technologies, such as blockchain, to create a decentralized network of financial applications and services. Instead of relying on traditional financial intermediaries like banks, DeFi enables users to access financial services such as lending, borrowing, and trading directly through peer-to-peer networks. According to Grand View Research, the global decentralized finance market size was valued at USD 13.61 billion in 2022 and is expected to expand at a compound annual growth rate (CAGR) of 46.0% from 2023 to 2030- very much driven by the transformation of the financial and insurance sectors, as well as the surge in e-sports and games with its DeFi tokens for in-app purchases. In all those cases, interoperability is a crucial aspect of DeFi. Different DeFi platforms and applications can be integrated and communicated, allowing users to access a broader range of financial services and assets. For example, users can use a decentralized exchange to trade different cryptocurrencies or a DeFi lending platform to borrow funds using their crypto assets as collateral. Overall, the emergence of DeFi represents a significant shift towards centralized and enclosed financial systems, offering greater accessibility and transparency for users while also challenging traditional financial institutions.
A different example of this trend is in the transportation sector. In decentralized transportation systems, interoperability refers to the ability of other platforms to work together and allow users to access a broader range of transportation options, as in the mobility-as-a-service (MaaS) platforms. The global Maas market – supported by solutions that integrate multiple modes of transportation, such as bikes, cars, and public transit, into a single platform- reached a value of approximately USD 188.21 billion in 2022 and is expected to grow at a CAGR of 17.60% between 2023 and 2028, reaching a value of around USD 494.46 billion by 2028, according to EMR Consultancy. These MaaS platforms use interoperable data standards and APIs to enable different transportation providers to communicate and share information. This way, users have easy access to other modes of transportation within a single platform, providing a more seamless and convenient transportation experience. Additionally, interoperability can enable more efficient transportation systems, facilitating better coordination and utilization of different transportation modes.

Use Cases

WhatsApp interoperability

Decentralization & Interoperability: The EU’s newly agreed-upon Digital Markets Act could require messaging app developers to make their apps work together. The Digital Markets Act is meant to let small players compete with big ones. In the EU’s press release, it says that lawmakers agreed that the “gatekeeper” companies behind WhatsApp, Facebook Messenger, or iMessage would have to make their apps “interoperable” with smaller messaging platforms at the developers’ request.

Lowe's Open Builder

Decentralization & Interoperability: Lowe’s announced it will begin helping builders of the metaverse create new possibilities. Rather than entering the metaverse with a storefront to sell virtual goods, Lowe’s aims to equip builders free of charge with items from its real-world shelves to make their creations more beautiful, more useful and more inspiring. To start, Lowe’s will make more than 500 3D product assets available for download for free via Lowe’s Open Builder, a new asset hub designed to be available to all creators, addressing key challenges of interoperability and accessibility. For added inspiration, Lowe’s will also release a limited NFT wearable collection* for builders in Decentraland to the first 1,000 participants starting to outfit their avatars in boots,

Ford F150 Backup Power

Virtual Power Plants: With the launch of the electric F-150 Lightning, Ford has touted the ability to use the truck to power a house in the event of a blackout. Though exporting power isn’t unique to the Lightning, the system is integrated in a way that no other electric car on sale today offers.

Tesla Swell Energy

Virtual Power Plants: In January 2021, in partnership with Tesla Powerwall, energy and smart grid solutions startup Swell Energy announced plans to launch a VPP spanning the Oahu, Maui, and Hawaii islands. While the startup had previously kickstarted VPP programs in other locations, at the time of the announcement, its project in Hawaii was expected to be its largest to date — with participation from 6,000 residential homes. At the end of November 2022, Swell Energy raised $120M in funding to advance its VPP programs across the US. Tesla launched its own VPP later that year in California to help the state’s strained energy grid and prevent outages for consumers. By November 2022, over 5,500 Powerwall battery-equipped homes were

Use Cases

WhatsApp interoperability

Decentralization & Interoperability: The

Lowe's Open Builder

Decentralization & Interoperability:

Ford F150 Backup Power

Virtual Power Plants: With the

Tesla Swell Energy

Virtual Power Plants: In January

Sub-Trend Sources
Decentralization & introperability: Next Atlas Trend Confirmations and Predictions for 2023
Virtual power plants: CB Insights Tech Trends 2023
Clean rooms interoperability: eMarketer Tech Trends to Watch