The Path to Decentralization: Challenges of Power Structures Faced by Crypto Projects

Vitalik Buterin, co-founder of Ethereum, published a paper titled “Balance of Power” at the end of the year, highlighting a critical issue overlooked by the cryptocurrency industry. That is, the problem of “decentralization of power” during project growth. While many project teams focus on securing resources necessary for business continuity, they have neglected an equally important issue: optimizing the power structure. This structural contradiction poses a risk factor for the entire industry.

Discrepancy Between Business Models and Decentralization Design

According to Mr. Buterin, many current crypto projects prioritize a “continuous funding mechanism.” While essential for maintaining team operations, this structure can easily lead to excessive concentration of power. To resolve this paradox, it is necessary to strategically incorporate decentralization of power distribution and decision-making processes within the project at the same level as business model design. If power is concentrated in a specific entity, the system risk (the emergence of a single point of failure) increases, making the project more vulnerable overall.

Learning from English and Open Protocols: The Essence of Decentralization

Interestingly, there are areas where decentralization occurs naturally. Mr. Buterin cites the English language as an example. Since language systems lack central control points, anyone can freely operate and evolve them. Similarly, open protocols like TCP, IP, and HTTP are adopted and improved freely around the world because no single authority governs them. These systems are inherently designed to promote decentralization.

The Need for Institutional Design to Achieve Decentralization

However, decentralization does not automatically occur in all use cases. In many crypto projects, decentralization does not happen spontaneously; it requires conscious and strategic efforts by the project team. This includes establishing governance structures, optimizing power distribution, and designing transparent decision-making processes. Mr. Buterin emphasizes that such institutional design and architectural optimization are key to balancing flexibility and efficiency while avoiding the pitfalls of centralization.

Encouraging Action in Projects

Mr. Buterin urges the industry to fundamentally review its power structures. Decentralization should no longer be an added value that is “nice to have,” but a core goal of project design. Building long-term sustainability and trust requires sincere efforts to address the issue of power decentralization, just as much as commercial success. This shift in awareness will be a crucial step toward the next stage of the cryptocurrency industry.