Cryptocurrencies: Don't Overlook "Decentralization"—Vitalik Buterin's Theory of Power Balance

In a recent paper titled “Balance of Power,” Ethereum co-founder Vitalik Buterin highlights the structural challenges faced by the cryptocurrency industry. While many projects focus on fundraising and building operational frameworks, there is a neglect of more fundamental issues—namely, the concentration of power and the associated risks.

The Duality of Business Models and Decentralization

During the development phase of crypto projects, the “business model” is usually the top priority. That is, establishing mechanisms for the team to continuously secure resources and grow the project. However, Buterin emphasizes the limited perspective of this approach. Designing the power structure within the project—specifically, preventing excessive control by a single entity and building a “decentralized model” to avoid systemic risks—should be considered equally important as the business model.

Naturally Dispersed Domains and Areas Requiring Design

Interestingly, Buterin categorizes the mechanisms for achieving decentralization into two groups. In natural languages like English, or open protocols such as TCP, IP, and HTTP, there is no clear central authority. These systems are inherently structured so that no single entity can physically dominate the entire system, ensuring natural decentralization.

In contrast, many crypto projects are different. Achieving decentralization here requires deliberate and proactive institutional design and structural innovation by the project team. Maintaining decentralization, which does not happen automatically, is a key factor influencing the long-term reliability of the project.

Challenges the Industry Must Address

Buterin states that exploring ways to avoid the concentration of power—while maintaining the efficiency and flexibility of centralization—is a critical challenge for the crypto industry. In other words, projects need to reconsider their power structures and treat the implementation of decentralization as a “design goal on the same level as the business model.” This is not merely an ideal but a practical issue that significantly impacts the sustainability of projects and their market valuation.