Author: danny; Source: X, @agintender
“The trend of the world is that what has been divided will eventually unite, and what has been united will eventually divide.” This is a famous quote from the beginning of “Romance of the Three Kingdoms.” It describes the cyclical nature of historical dynasties, but if we turn our gaze to the blockchain and cryptocurrency world, are we also replaying this fate? Decentralization was born with the ideal of countering monopoly and breaking authority, but in the evolution of PoW and PoS, we have repeatedly seen the trajectory of “centralized forces” making a comeback. Small miners from humble backgrounds find it increasingly difficult to fight alone and can only rely on mining pools; in the world of PoS, the more capital one has, the more one can solidify their discourse power. At the end of decentralization, there always seems to be a shadow of centralization.
1. The Ideal of PoW and the Reality of Mining Pools
The Bitcoin white paper depicts a fair world: as long as you have computing power, you can participate in consensus and earn rewards. This is a typical vision of decentralization—everyone is equal, and nodes are autonomous.
With the intensification of computing power competition, it is nearly impossible for individual small miners to independently mine a block. Hundreds of T of computing power can only compete against the scale of tens of thousands of P from mining pools. Therefore, small miners can only aggregate under mining pools, contributing computing power in exchange for rewards distributed proportionally.
The ideal of “permissionless” in PoW is also faced with the challenges of economic reality. For mature PoW networks like Bitcoin, independent mining by small miners is no longer realistic. The computational power competition in the Bitcoin network has reached an industrial scale, requiring huge investments in expensive ASIC mining machines and cheap electricity, which is no longer within the realm of independent competition.
The mining pool has become the hub of new power. They allocate computing power, select blocks, and may even launch a “hashrate attack” in extreme cases. PoW has not moved towards pure decentralization, but has instead been wrapped in scale effects, restructured into a “centralized alliance.”
2. The Capital Logic of PoS: Coin Power is King Power
If the inequality of PoW comes from the capital threshold of mining equipment, then PoS is the naked financial capital logic.
In the world of PoS, holding coins equates to power, and more staking means higher chances of block production and returns. This implies that large capital accounts (exchanges, funds, early whales) inherently possess a stronger compounding effect: the wealthier individuals can earn more money, ultimately monopolizing the governance and security of the network.
It is difficult for newcomers to achieve leapfrog success, known as the difficulty of producing “noble children.” This is determined by its intrinsic economic model, which aside from being the Matthew effect of capital, large holders receive more rewards, and after reinvestment, further increase their equity and future returns, with influence expanding like a snowball.
The high entry capital also restricts the entry threshold. The re-decentralization of staking pools has also led to new centralization, with large amounts of funds concentrating in the hands of a few large service providers (such as Lido and Coinbase), which have become new power centers.
This is almost a mirror of capitalist society: it is difficult for the children of poor families to rise to prominence again, as the poor have no opportunity to accumulate wealth, while the rich continuously use compound interest to expand their advantages. Decentralization here gradually evolves into the self-replication of capital oligarchs.
3. The Dilemma of Decentralization: Technological Ideal vs. Real Power
Whether it is the pooling of PoW or the capital oligopoly of PoS, it reveals a fact: decentralization is just the starting point, while centralization is the result of the process.
This is no different from the real world. The capitalist market claims to be based on free competition, but it often evolves into an oligopoly; political societies emphasize the decentralization of power, yet they ultimately tend toward centralization. As an experiment in a “digital society,” blockchain naturally cannot escape this historical trend.
IV. The Centralized “Wealth Creation Machine”: The Birth of Foundations, Exchanges, and New Elites
The ideal of decentralization emphasizes equal participation for everyone, but in reality, for a new project to be seen by the market, it almost cannot bypass a few centralized “wealth-making machines.”
1. The support of the foundation. The thriving ecosystems of many public blockchains do not grow naturally, but are instead sustained by the funding from the foundation.
- Ethereum Foundation: Shaping the prosperous landscape of DeFi, Layer 2, ZK technology, etc., through funding, hackathons, and research grants. Without the long-term investment from the foundation, the Ethereum ecosystem could not have formed the moat it has today.
- Solana Foundation: During the bull market of 2021, continuously invested in DeFi (Serum), NFT (Magic Eden), GameFi (StepN) and other projects, rapidly building an ecological matrix for a new public chain with funds and resources.
Without the blood transfusion from these foundations, it is almost impossible for individual development teams to break through in the complex and intense competition of public chains.
2. The Star-Making Effect of Exchanges. In the cryptocurrency market, exchanges are the entry points for traffic. Who can get on Binance, Coinbase, OKX often determines whether a project can attract global attention.
- Binance: No airdrop means no listing, which means no liquidity, but this is the liquidity “destination” for every project.
- Coinbase/Upbit Listing Effect: Although the effect is weakening, it is still regarded as a treasure by project parties.
- OKX/Bybit Launchpool: Similarly, through the model of “mining to list coins”, new projects can quickly gain exposure and a user base.
In an ecosystem with a market value of over 10 billion USD, small teams have almost no opportunity for independent gaming and must rely on the endorsement and token of the exchanges.
3. VC, Capital Networks, and KOL. Prominent VCs (a16z, Paradigm, Yzi Labs, Multicoin, etc.) are not just providers of funds, but also narrative creators and amplifiers of discourse.
- a16z: Strongly supported Uniswap and Compound during the DeFi Summer, and later promoted the concepts of NFT and Web3.
- Yzi Labs: Invest and promote the BNB Chain ecosystem. Being unable to enter the core circle means missing out on ecosystem support.
Without the spotlight of these capitals, the vast majority of protocols, no matter how good their technology is, may be overlooked.
V. The Dilemma of the Poor: Why Is It Becoming Harder for New Nobility to Emerge?
Today's blockchain ecosystem is superficially a decentralized open network, but in fact:
- Uneven resource allocation: The foundation’s funds, the exchange’s traffic, and the VC’s capital are more concentrated within the “network of relationships”.
- Narrative Control: Leading capital and exchanges can determine market trends and define what the “next hot spot” is.
- High sunk costs: If a new project does not have sufficient funding support from market makers, it is difficult to gain market recognition and liquidity, let alone the possibility of being listed.
- Exchange > Market Maker > Traffic > Project Party, the Project Party is at the bottom of the food chain.
This has led to a “decentralized cold door,” where ordinary developers or grassroots teams find it increasingly difficult to break through solely based on technology or ideas, ultimately having to rely on the “centralized power network” in order to potentially grow into a “centralized nouveau riche.”
6. The Final Frenzy: When the Exit is Blocked, Meme Becomes the Only Game
When the rising channel of serious innovation is firmly controlled by capital and power networks, the new entrants from humble backgrounds will naturally seek new avenues. Since they cannot compete with the giants at the “value investment” table, they turn to another game that seems fairer and crazier—Meme. This is the current phenomenon: newcomers are no longer obsessed with white papers and technical narratives, but are flocking to Meme, flocking to Pump fun, because in the old paradigm, they can no longer see a way out.
The rise of Meme coins is essentially a rebellion against a VC-dominated crypto world. It abandons complex utility and roadmaps, returning to the purest core of internet culture: community, entertainment, and virality. For newcomers who see no hope, Meme has become an “obvious” way out. Psychological factors such as FOMO, a sense of community belonging, and the pursuit of the dopamine rush from excitement drive this lottery effect, attracting a large number of speculators eager for quick profits.
New entrants into the space flock to Meme and Pump fun not out of ignorance, but as a rational choice after seeing the rules of the “centralized aristocracy”. When the path to class mobility through technological innovation is blocked, immersing themselves in a high-risk, high-reward, and more transparent Meme frenzy becomes the only option they can see and are willing to participate in. This is a desperate cry and also a deconstructive revelry against the old power structures.
Sadly, even Memes have now become products on the dealer's assembly line, becoming a capital power game wrapped in cultural memes and the attention economy.
7. Reflection: The Historical Cycle of Division and Unity
So, is decentralization just an illusion? Not necessarily.
Decentralization is not a one-time ultimate state, but rather a continuous, dynamic struggle. It is an ideal and a counterforce against the inherent efficiency advantages of centralization and the natural tendency towards the concentration of power.
It is more like another cycle of the “law of historical division and unification.” Just like the changes of dynasties in Chinese history: division leads to unification after a long time, and unification leads to division after a long time. Centralization can bring order, efficiency, and security, but it inevitably accumulates rigidity, corruption, and oppression; decentralization, on the other hand, releases freedom, innovation, and diversity, but it can also easily lead to division and inefficiency.
Technology has merely accelerated this cycle, rather than breaking it. PoW and PoS may just represent different phases of the cycle, one emphasizing “power decentralization” and the other emphasizing “capital order,” but both find it difficult to escape the fate of the “strong becoming stronger.”
Postscript
“In a decentralized environment, it is even harder for centralized elites to emerge.”
This is not pessimism, but a stark recognition of reality. Decentralization is not the end point, but a cyclical force that shocks the old order, creates new possibilities, but ultimately will give birth to new centralization.
The issue is not about “whether decentralization will lead to centralization”, but rather whether we can build a more just, transparent, and sustainable order between the next round of division and merger. This may be the true destiny of blockchain.
