Designing Power Structures in Crypto Projects: Vitalik Highlights Key Challenges of Decentralization

Vitalik Buterin, co-founder of Ethereum, recently published a paper titled “Balance of Power” in which he discusses the fundamental challenges faced by many crypto projects. He points out that the balance between centralization and decentralization of power in project development is not merely a technical issue but a strategic challenge directly related to the long-term sustainability and stability of the system.

“Decentralization Design” as Important as Business Models

According to Vitalik’s analysis, many development teams in crypto projects tend to focus solely on building a “business model,” which is the method of securing resources necessary for project operation and maintenance. However, what is often overlooked is the “decentralization mechanism” that prevents excessive concentration of power within the project and helps avoid systemic risks.

Vitalik emphasizes that both are equally important, and optimizing only one side is insufficient. Excessive concentration of power in specific entities creates vulnerabilities for the project and poses a risk of decreasing reliability over the long term.

Learning Natural Decentralization Models from English and Protocols

A noteworthy point is that Vitalik points out there are two patterns of decentralization. The first is “natural decentralization,” which is more easily realized in structures without clear central control points.

A specific example is natural language systems like English. Since there is no central authority managing language usage uniformly, it is practically impossible for a single entity to monopolize the entire language system. Similarly, open protocols such as TCP, IP, and HTTP are designed with a decentralized structure from the outset, and do not incorporate mechanisms for power concentration.

Intentional Design for Optimizing Power Structures

The second pattern is that, depending on the use case of a project, natural decentralization may not automatically occur. In such cases, project teams need to consciously design the governance architecture and incorporate mechanisms for power distribution.

This is not merely a technical trick but involves establishing governance structures, incentive designs, voting rights distribution, and other layered approaches to achieve appropriate decentralization of power.

Long-term Challenges Facing the Crypto Industry

Vitalik stresses that how to balance avoiding the weaknesses of centralization while maintaining flexibility and efficiency is a critical challenge that the crypto asset industry will face for a considerable period.

This is not a theoretical issue but a practical challenge in actual project management. Development teams are required to continuously review power structures and position “decentralization” as an equally important design goal as the business model. The era has arrived where the maturity of crypto projects will be measured by how well they distribute power appropriately and minimize systemic risks.