The Myth of Decentralisation

Decentralisation doesn’t exist.

Well, not in the way that we wish it would.

The premise is simple. Having your wealth/data controlled by any centralised authority – as has been the case throughout most of human history – means that ultimately you risk having your entire life taken away from you at any time.

It is usually framed as a lack of control of your destiny, and to be perfectly fair, is a valid criticism.

There are numerous examples in both history and in our times today where individuals and groups had their lives turned upside down because of an unjust, oppressive decision taken by someone who held a higher authority over their wealth.

We see this both on a national and international level where (for better or worse) individuals and countries may be sanctioned and many of their assets, financial or otherwise, are either inaccessible or simply seized.

The Idea

With a functioning, decentralised financial system, our theoretical individual/entity would have no authority above them capable of restricting or confiscating their wealth or assets. The entire concept behind Blockchain technology and its most prominent financial manifestation, Bitcoin, is that you own your wealth (provided you have your own private wallet) and no entity can prevent you from buying or spending using it.

No longer does any individual have to place his trust in financial systems he doesn’t believe in, no longer does he have to fear losing his wealth due to an oppressive seizure based on trumped up charges. He is finally the master of his own fate.

Sounds simple, right?

But there is one monumental assumption that is a fundamental prerequisite for the construction and sustained execution of this idea. That assumption is that we live in a utopia, a society where everyone agrees to participate in line with the ideals of decentralisation and to never abuse its weaknesses.

Indeed it is because people have abused the structure of centralised entities that people are calling for decentralisation in the first place, but this abuse can and has very easily been imported into a decentralised system too.

Quite simply, such an assumption requires an ideal world. A world other than the real, raw, flawed world we actually do inhabit.

The Reality

For a financial system like the one facilitated by Blockchain technology (say, Bitcoin) to function as advertised, we need it to exist in a world where there are no bad actors intent on using the freedom from official regulation to further their own self interest.

In addition, the world we live in, even the one before the advent of modern technology, has overwhelmingly been one of centralised power. Almost all of our infrastructure at a societal, national and international level is based upon centralised power, technology and institutions. To impose a utopian ideal of complete decentralisation onto such a world cannot require anything less than perfect human beings who do not covet or desire more than their ordained share.

Such a world does not exist as we know it. Our world contains no shortage of people ready to exploit and manipulate markets, assets and people for the purpose of enriching themselves. Indeed, the very word ‘utopia’ was coined by Thomas More in the 16th Century using the root Greek words for ou (“not, no”) and topos (“place”) [1].

By definition therefore, a utopia does not exist.

Rather than focusing our attention on this imaginary world which has no correlation to our real lives, we instead look at the world we do live in and see the results of attempts at decentralisation today.

External Influences

While much is said about the ‘1%’ who own a disproportionate amount of the wealth of developed nations compared to the rest of society, formal estimates suggest that only 0.01% of Bitcoin holders control an astonishing 27% of the total Bitcoin in circulation [2]. This even greater disparity paints a bleaker picture for the balance of wealth that so occupies the minds of those concerned about inequality, but the truth is that there is simply no one there to stop it, since this is both enabled and allowed entirely by design.

When it comes to Bitcoin transaction validations, 60% will go through the same four entities [3]. In the same vein, 60% of all Bitcoin traffic travels through just 3 ISPs [4]. Clear bottlenecks and even clearer attack vectors for any state actors wishing to disrupt the cryptocurrency markets.

And so, without any higher authority working to ensure that transactions and markets remain functioning within boundaries and according to some set of rules, we have an open playing field ripe for bad actors to exploit as they wish, and exploit they have.

The removal of all regulations and centralised authority means that the playing field indeed remains level, but that it also favours organised action instead of the individuals who expected to thrive on their own. Absolute decentralisation exists only for a fleeting moment after inception before power naturally converges on a new centre of gravity.

Historian Will Durant writes in his book ‘The Lessons of History’:

“…Practical ability differs from person to person, the majority of such abilities, in nearly all societies, is gathered in a minority of men. The concentration of wealth is a natural result of this concentration of ability, and regularly recurs in history.” [5]

He then goes on to say:

“We conclude that the concentration of wealth is natural and inevitable, and is periodically alleviated by violent or peaceable partial redistribution.” [6]

This is not to argue that this centralisation is inherently correct, but that it is merely inevitable, the default state of human civilisation. Any visions dreaming of permanent, equalised distribution have yet to measure themselves against the yardstick of recorded history and its informed assumptions on the future.

Another relatively well known, decentralised, technological system used today is Internet Routing via the TOR Network. Touted for its anonymity and resistance to any imposed censorship, using the TOR Network has been used by journalists, dissidents and even criminals to obfuscate and hide their traffic. Built upon the same principle of decentralisation, it sounded like a viable solution for anyone desiring to stay away from prying eyes … or is it?

Researchers in 2020 published the below:

“…We uncovered a malicious actor running more than 23% of the entire Tor network’s exit capacity. That means roughly about one out of 4 connections leaving the Tor network were going through exit relays controlled by a single attacker.” [7]

Decentralisation leads to no one being in control which, in turn, leads to anyone being in control, and as we have seen here the ideals of anonymity, security and resistance to censorship have been rendered void. State actors becoming the TOR Network is only possible because there is no barrier preventing them from doing so. Removing the fence that separates the garden and the wilderness spells disaster for the very existence of the garden itself.

Internal Influences

Bad actors thrive under a system devoid of regulation and it is only a matter of time before such a reality makes itself manifest. In the Wild West, the largest, strongest gangs are those who control the rocky plains. You simply cannot build a system relying on the good will of the people at a global scale. Such unfettered optimism speaks only of the naivety of the dreamer. Some people will always try to cheat, exploit, manipulate and even destroy, if we dismissed this reality then nations of the world would not spend billions on maintaining and developing large armies despite not longing for war.

Anyone wishing to manipulate the market is free to do so as long as they have the capability, and in an unregulated system this capability isn’t impossibly hard to achieve.

‘Pump and Dump’ schemes are another way for people to organise and manipulate the decentralised, unregulated nature of cryptocurrency in order to make gains at other peoples loss.

A pump-and-dump scam is a sort of fraud in which the perpetrators amass a commodity over time, inflate its price artificially by disseminating false information (pumping) and then sell what they have accumulated to unwary buyers at a higher price (dumping). Once the perpetrators have fraudulently inflated the price, it usually declines, leaving purchasers who made their decision based on misleading information at a loss.” [8]

The people organising these ‘Pump and Dump’ schemes often rake in most of the profits, whereas unsuspecting victims seeking to catch the boat on the ‘next big thing’ are left reeling in their losses.

Another aspect worthy of note is that in order to succeed in traditional markets, no company wants to turn renegade and challenge the authority of the country they operate in. Ultimately they are more likely to concern themselves with their bottom line rather than any principles of decentralisation and the resulting divorce from authority outlined in any whitepaper. These entities have therefore taken the choice to abide by the financial regulations of the nation they function in, meaning that the very cryptocurrency they are validating is not only likely to be bottlenecked at these four entities, but also by the laws of the nations they operate in themselves.

Where the ideal was to be free from any type of external sanctions or asset freezing, the desire for profit has bought the oft decried evil of censorship and centralisation to the Bitcoin network itself. Rather than fashion itself as a financial system alternative, it seems to be becoming yet another department working alongside it and heading for eventual integration into the existing system.

Large players holding significant amounts of Bitcoin also have the power to influence the price at any given time. Known as ‘whales’ for their implied financial footprint, movements and transactions made by them have the capability to affect market stability very rapidly. Admittedly, not everyone with significant holdings in a coin intends to alter the markets, they may simply want to be humble participants in the endeavour. Even with such pure intentions however, by mere virtue of being a whale, their every movement on the blockchain is openly scrutinised to the extent that even innocent levels of activity are able to trigger real panic.

When whales or individuals with influence on a coin do act recklessly however, they can intentionally spark (or spook) the markets almost at will, allowing them a degree of effective control. A notable example is with Elon Musk’s tweets and their sporadic impact on Dogecoin. This tweet for example saw the price of the coin jump up by almost 10% [9]. Previous mentions by the world’s richest man saw the coin quadruple in price within just a 24 hour timeframe. These instances again raise the same question, how decentralised is cryptocurrency really when people naturally converge on a centre, in this case an eccentric CEO with heavy social media presence?

Mining is another aspect of Bitcoin where power coalesces along familiar lines. Bitcoin utilises the Proof-of-Work method meaning that miners who contribute computing power to solve equations are rewarded for their work in Bitcoin itself. These equations get more and more complex as time goes on, meaning that more computing power is then needed to solve these equations.

This leads to an inevitable crossroads.

Individual miners simply will not have the resources to compete with large players who have invested tens or even hundreds of thousands of dollars into specialised rigs to do the same thing, not to mention involvement at the nation-state level. Eventually it become nonsensical to mine Bitcoin by yourself and instead makes more sense to join a large pool. Centralisation it seems, is in some shape or form inevitable. Add to the mix Governments actively coercing pools not to process specific Bitcoin transactions and we have the decried excesses of the current financial system all over again.

The more things change, the more they stay the same.


If you’ve made it this far and are expecting some fixes to the problems mentioned, I’m sorry to disappoint you. There are no fool proof solutions here, but an important first step is to truly understand that true decentralisation is reliant on the good will of the general masses. Unfortunately for the majority of the well intentioned public, a small minority of those seeking to exploit the system have an easier time pooling their resources and focusing their efforts to disrupt the fairness of the system. Lawlessness favours the lawless.

It is undoubtedly clear that some centralisation is necessary for a system to thrive. Whether that comes in the form of a Regulatory Council or Government legislation, that is a discussion to be had at the relevant levels. The floor is open for debate however, as to who should comprise of any hypothetical Regulatory Council, how to implement fail safes against attempts at compromise or to what level Government should have any say in the matter.

What is both unavoidable and abundantly clear however, is that the absolute decentralisation of wealth or assets can be just as dangerous as their absolute centralisation. The former leaves the market susceptible to organised groups who have no limit on their actions, the latter leaves one open to having everything seized in the blink of an eye, never really ‘owning’ anything in the first place. The end result is identical for the average user in the respective ecosystem, no real, full control over their wealth/assets and increased risk for the loss of their wealth entirely in one form or another.

In true cliched form, a middle ground is sought where individuals and markets have enough freedom to function autonomously, but enough regulation such that bad actors cannot exploit the system itself.

The quest for true freedom ironically involves some form of limitation.

We can again seek wisdom from Will Durant when he writes:

“Since men love freedom, and the freedom of individuals in society requires some regulation of conduct, the first condition of freedom is its limitation; make it absolute and it dies in chaos.” [10]

Ultimately, the meaningful choice that must be made is how much centralisation we are willing to accept, and what risks we are willing to take in exchange for the reassurance it provides. As of time of writing, the myth of complete decentralisation exists only in the minds of its proponents. As fallible, emotional and more importantly social beings, we inherently crave structure, having the tendency to create order out of chaos. Such a desire is what makes us human beings, and any attempt at decentralising sections of our societies should take that into account.


[1] – Utopia Definition & Meaning – Merriam-Webster
[2] –
[3] –
[4] –
[5] – Will Durant, The Lessons of History
[6] – Ibid.
[7] – How Malicious Tor Relays are Exploiting Users in 2020 (Part I) | by nusenu | Medium
[8] – What are crypto pump-and-dump groups? Are they legal? (
[9] – Dogecoin price jumps after Elon Musk says ‘release the Doge!’ | The Independent
[10] – Will Durant, The Lessons of History

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