Every Decentralization Revolution Ends in Centralization

The dictionary definition of revolution is “a rapid and fundamental change in the foundations of the state, the institutions of society, and the organization of the economy, carried out beyond the bounds of the constitution.” Because the foundations of the state, social institutions, and economic organization are artificially created centralized frameworks designed to integrate and to some extent control individuals (and thereby achieve social cohesion), to carry out a revolution essentially means to break away from the existing track and move toward decentralization.

Revolutionaries always advocate decentralization with the same old idealism. According to them, through the new revolution they are leading, “power will be distributed, everyone will have equal authority, and the system will run on its own.” If this sounds familiar, it is because this repertoire has been endlessly reused throughout history. The most recent example is Bitcoin.

The core claim of the Bitcoin white paper (2008, Satoshi Nakamoto) can be summarized in the following sentence:

Bitcoin is a digital currency that allows money to be sent and received without a trusted third party (a bank). If someone wants to send Bitcoin, they must first create a “transaction.” This transaction includes who is sending how much to whom, and a digital signature proving that the sender is actually authorized to spend those funds. The transaction is then propagated over the internet to Bitcoin participants (nodes) around the world.

There are people who gather these propagated transactions and bundle them into a single “block.” We call them miners. But not just anyone can register a block on the network. First, they must win a competition to solve a specific numerical puzzle. The process of solving this puzzle is called Proof of Work (PoW), and what it uses is a hash value (hash).

A hash value is a method of converting input data into a fixed-length code that appears random. To register a block, you must find a hash that satisfies a very specific condition—for example, “the hash value must start with five zeros.” To find such a hash, you have to keep computing by feeding in countless numbers until you hit the right answer. This random computation process is called “mining.”

When someone solves the puzzle first, that person’s block is propagated. Other participants then verify whether the block meets the required conditions and attach it to the existing “blockchain.” This way, the new transaction data is officially recorded and becomes irreversible. At this point, the miner receives newly issued Bitcoin and transaction fees as a reward.

This entire structure is designed to ensure that transactions are processed honestly without a trusted institution. All transaction records are publicly available to everyone, and thanks to hash values, any tampering with the data is immediately detectable by other participants. In theory, therefore, Bitcoin has neither banks nor administrators, yet operates accurately, and miners are incentivized by economic rewards (newly minted Bitcoin) to maintain the Bitcoin network.

Seventeen years after the publication of the Bitcoin white paper, most tokens (cryptocurrencies such as Ripple) have moved away from the PoW (Proof of Work) structure that Satoshi Nakamoto deemed essential for building a decentralized transaction system, and have shifted to PoS (Proof of Stake). The reason is the most fatal drawback of PoW: its cost.

Ethereum initially started with a PoW structure like Bitcoin, but as transaction volume exploded, the network became congested, and gas fees (transaction costs) soared to as high as $100 per transaction. In addition, because all nodes store the same information, the system slowed down exponentially as data accumulated. To address these drawbacks, Ethereum transitioned to PoS, which allowed it to process many more transactions in parallel (reducing transaction costs) and to improve performance through sharding.

PoS, literally, means that the participants with the largest stake hold the greatest power in the network. In practice, it is not individuals but large institutions, venture capital firms, and major staking services that have accumulated most of this stake. In fact, Lido, which currently stakes (deposits) the most ETH on Ethereum, controls more than 30% of the network’s total staked amount. This means that in a blockchain network that once championed “decentralization,” a single protocol is effectively on its way to securing a majority stake in governance power.

Lido solved the inconvenience of staking (depositing) by issuing a token called stETH to participants. stETH is essentially a receipt-like token you receive in return for staking your Ether. This token provides liquidity in place of the staked ETH until it can actually be withdrawn, and it is also traded in DeFi markets as a separate asset. Thanks to this, users can freely manage their funds even while their ETH is staked, but at the same time, the network’s stake-based power has started to concentrate around stETH.

Lido is operated by a community called a DAO (Decentralized Autonomous Organization). Unlike traditional companies or institutions where decisions are made centrally, a DAO is a system in which token holders vote to determine the direction of the protocol. On the surface, this looks like a highly democratic structure, but in reality, it is very common for a small group with a large number of tokens to monopolize the DAO’s decision-making power. In Lido’s case as well, stETH holders are steering governance, and their influence is spreading across the entire network.

In the end, the decentralization revolution has circled back to centralization. Only the names have changed; the reality has not. The attempt to eliminate third parties has created a new, gigantic third party.

Revolutions begin with a dream of decentralization, but as time passes, power concentrates again. This is not because of technological limitations or institutional flaws, but because of the fundamental way human groups operate. Power always pursues efficiency, and efficiency inevitably produces centralization. Bitcoin, Ethereum, and Lido alike have not escaped this law.

Attempts at decentralization matter. But believing they will ultimately succeed borders on illusion. It may not be that we have failed to build a decentralized world, but rather that decentralization itself was never a goal truly compatible with human society.

Power does not stay dispersed. It is merely reborn under new names and in new forms.