Seventeen years after Satoshi Nakamoto’s epoch-defining whitepaper, the industry needs to confront an uncomfortable truth: crypto has so far failed at its central promise. The vision was to eliminate intermediaries, destroy gatekeepers, and build permissionless systems. Instead, the industry has recreated the exact power structures it swore to replace, and often in more concentrated forms than before.
The New Bosses, Same as the Old Bosses
The pattern is everywhere once you see it. The industry built decentralized exchanges to escape Coinbase’s high fees and control, only to watch Binance capture half of global trading volume. Developers created DeFi protocols to bypass banks, then funnelled everything through a handful of centralized stablecoin issuers. Advocates championed self-custody as financial sovereignty, only to watch 90% of users choose the convenience of custodial platforms. At every turn, centralization reasserts itself.
But here’s what makes this particularly galling: just as crypto-native firms were building their own centralized empires, governments and policymakers (bastions of centralization) first sought to crush crypto-natives, then swiftly opened the door for the old gatekeepers to return. BlackRock’s Bitcoin ETF didn’t happen because the industry suddenly won the regulatory argument. It happened because traditional finance (TradFi) said “we’ll take it from here, thank you” and suddenly the same regulators who spent years crushing crypto-native firms found remarkable clarity in their frameworks. TradFi giants, Fidelity, Standard Chartered, JP Morgan and others aren’t simply adopting crypto – they’re domesticating it.
Regulatory Capture as Industrial Policy
The regulatory warfare was never really about consumer protection or financial stability. It was industrial policy disguised as enforcement. Binance gets hunted across every jurisdiction while BlackRock gets a Bitcoin ETF approved in record time. Crypto-native founders face years of legal uncertainty while traditional banks get clear guidelines for custody services.
Changpeng “CZ” Zhao was jailed in the U.S. for four months, fined $50m, and forced to step down as CEO of the company he founded. His company, Binance, was also fined a staggering $4.3bn for failing to implement an adequate know-your-customer (KYC) process, whilst HSBC was fined only $1.9bn for “actually” laundering some $800m for Mexican drug cartels.
The message is obvious: innovation is permitted, but only under the “right” management. Still, some will argue that the apparent TradFi takeover of crypto represents victory, i.e. institutional adoption, regulatory clarity, and mainstream acceptance. But adoption by whom, and on what terms? When a “decentralized” protocol requires KYC through a handful of approved providers, when DeFi positions are actually held by traditional custodians, when permissionless systems route through regulated chokepoints, what exactly has been decentralized?
The Gravity of Centralization
The uncomfortable answer is that centralization isn’t just winning; it might be inevitable. The forces pushing crypto toward gatekeepers are structural, not accidental. Centralized exchanges offer dramatically better user experience than self-custody. Regulated custodians provide institutional investors with the legal comfort they demand. Concentrated liquidity venues deliver better prices than fragmented DEXs. Compliance infrastructure requires centralized identity verification. At every layer, there are practical reasons why centralization emerges.
Even supposedly decentralized protocols betray the pattern. Check the actual distribution of governance tokens, the composition of multisigs controlling protocol upgrades, the concentration of validator sets, or the dominance of a few RPC providers (Remote Procedure Call (RPC) providers are the centralized infrastructure services that most “decentralized” apps depend on to communicate with blockchains).
Most Decentralized Applications (DApps) run through just three RPCs: Infura, Alchemy, and QuickNode. Many “decentralized” networks are secured by a handful of professional validator operations. Crypto governance is arguably mostly theatre, as real decisions happen in Discord channels and crypto foundation boardrooms.
Making Peace with Defeat
The industry makes excuses of course. This is just a transition phase. Real decentralization takes time. It’s still early. But, at some point, the question becomes whether crypto is building toward decentralization or just building centralized systems with extra steps and worse user experience.
The tragedy isn’t that the industry is failing to achieve pure decentralization, as that was probably always unrealistic. The tragedy is that it’s not even trying anymore. The narrative has shifted from “be your own bank” to “banking as a service.” From “code is law” to “code is law, subject to regulatory approval.” From “permissionless innovation” to “innovation within approved parameters.” The industry has learned to speak the language of decentralization while building the infrastructure of control.
It would be unfair of course to suggest that this was an entirely wilful surrender by crypto natives. TradFi giants and their collaborators in government and public policy have worked hard to help make this a reality. The egregious abuse of state power by public bodies, such as the U.S. Securities & Commission (under former chair, Gary Gensler) and the Central Bank of Nigeria (under former governor, Godwin Emefiele), and many others, created an existential threat to many crypto firms and ecosystems. So much so that they came to embrace any semblance of policymaker acceptance.
How else can one explain the industry celebration that followed BlackRock’s launch of a Bitcoin ETF? When crypto lending moves back to traditional banks, it’s hailed as the industry maturing. When governments demand surveillance of every transaction, builders create compliance tools and call it pragmatism. The industry, faced with the prospect of crushing defeat, has adapted and become an apologist for the very system it promised to replace.
Look Ahead
The centralization paradox isn’t that crypto built new gatekeepers – that was probably inevitable given the practical advantages of coordination. The paradox is that after building those gatekeepers, the industry has been forced to surrender to the old ones. It ran from the banks straight into the arms of bigger banks. It escaped regulatory capture just long enough to be recaptured by more sophisticated regulators. It built alternatives to the system, then spent a decade lobbying to be absorbed back into it.
This isn’t a temporary setback or a tactical retreat. It’s what crypto is becoming: a new front-end for old infrastructure, a source of volatility for traditional portfolios, a technology layer that makes legacy finance more efficient. Useful perhaps, but utterly disconnected from the revolutionary vision that started this.
If the industry is honest about where the currents are taking it, there might still be time to swim differently. But that requires admitting it’s drowning first.