Decentralization is the Only Defense for Public Chains Under Capital Siege

Despite its many flaws, Ethereum remains the best solution available.

Written by: Omid Malekan, Adjunct Professor of Finance at Columbia Business School

Compiled by: Saoirse, Foresight News

In a world filled with power and greed, humanity has tried various forms of blockchain. No one would claim that Ethereum is perfect or infallible. To borrow a phrase from Churchill (in essence): Ethereum is the blockchain with the most flaws—except for all the other alternatives available on the market.

(Note: Winston Churchill, the famous British politician and writer who led the UK against the Nazis during World War II, served as Prime Minister twice, and won the Nobel Prize in Literature.)

I spend most of my time debating with peers in the crypto industry, many of whom are my close friends. Our fundamental disagreement lies in the weight of decentralization in the design of underlying protocols. My peers believe decentralization is just one of many core features, while I firmly believe it is the only irreplaceable core quality. They prioritize scalability, while I see scalability as a derivative issue; they think business development and industry collaboration are necessary for project success, which I do not agree with; they believe abundant funding can boost public chain development, whereas I think that an influx of capital will inevitably drag projects down; when someone in the industry touts the practical value of permissioned chains, I can only laugh.

The most common criticism I face is that my views are overly idealistic and disconnected from reality, which is precisely the root of our disagreement. My starting point for thinking has never been the naive fantasy of a utopian society.

Underlying Logic: Seeing Through the Inherent Nature of Enterprises and Capital from a Power Perspective

I am a realist who understands human nature, having long studied history and analyzed the evolution of human social systems; I have also witnessed how powerful institutions will stop at nothing to maintain their power and seize commercial interests. My entire analytical logic leans towards Machiavellianism. Once you see the operating rules of the real world clearly, you will understand that those who are easily swayed by the hollow propaganda of tokenizing corporate databases are the true idealists disconnected from reality.

To align with mainstream industry narratives, one must simultaneously believe in several assumptions that contradict business logic: profitable companies will prioritize technological innovation over their own profits; the “innovator's dilemma” will not apply to platform-based underlying technologies; senior executives with seven-figure salaries, who understand existing industry rules, will genuinely wish for the current profit structure to be completely overturned. I deny all of these points. I firmly believe that companies have an inherent inertia they cannot escape; only a fully decentralized crypto system has the chance to break free from the constraints of capital and giants; all other compromise solutions will ultimately be co-opted, corrupted, and completely lose their original design intent.

The foundation of all rules in the crypto industry is the power of incentive mechanisms. Any blockchain capable of gathering millions of users and facilitating trillions in asset transfers will inevitably generate corrosive profit motives. Large enterprises and even national governments, if they do not attempt to hijack such networks, would be acting against the logic of business survival. Ignoring the development of blockchain could even directly threaten the survival of some traditional giants.

This is why, ten years ago, major institutions uniformly characterized Bitcoin as a scam, and it is also the fundamental reason they now loudly proclaim that “tokenization can only follow rules set by enterprises.” This operation is inherently filled with Machiavellian calculations: first, exhaust all efforts to suppress emerging technologies; if suppression fails, then turn to acquisition and transformation. Only a crypto network that has adhered to an open and neutral position since its inception has the chance to evade this comprehensive siege.

Core Risk: Internal Control Seizure is Far More Deadly than External Attacks

When discussing protocol security in the industry, everyone's attention is focused on external attacks like 51% hash power forks. However, we should be more vigilant about internal control being seized by capital; the mechanisms established by established public chains to resist external attacks have matured, while the risks of internal power seizures have become increasingly prominent.

Almost all existing traditional financial exchanges, clearing systems, and even mainstream social media platforms have not escaped the fate of internal power seizures and platform degradation in their development history. Visa and Mastercard are the most typical cases: both were initially just prototypes similar to today’s non-profit token alliance networks, but ultimately transformed into profit-driven monopolistic tools; Google publicly opposed using advertising as a business model for its search services in its early years, yet has now grown into the world's largest advertising service provider. This is the complete trajectory of platform degradation and the inevitable endpoint of the S growth curve that was once favored by numerous well-known venture capitalists.

Compared to payment clearing networks and social platforms, the risk of capital seizing control of a layer-one public chain is several magnitudes higher. A programmable, fully asset-settling layer-one public chain has a potential market scale that far exceeds the total of all traditional existing networks. A universal layer chain can cover a vast array of scenarios, including payments, securities clearing, social networking, gaming, digital collectibles, ticketing, and identity verification, providing immeasurable space for capital to exploit, transform, and profit.

From this logic, those who firmly believe in the feasibility of permissioned chains are too naive—such databases can be shut down or have all data altered at the push of a button by the operator. Similarly, the so-called permissionless layer-one chains with highly centralized validation nodes, lacking zero-knowledge proof mechanisms and only configured with a single sorter in public layer-two networks, are equally vulnerable. Believing in such centralized reform solutions is tantamount to assuming that all market participants will never engage in corruption, that institutions will never act maliciously, and that regulators and governments will always know how to self-regulate. To put it bluntly, it is like naively believing that Visa would genuinely want Mastercard to thrive.

Reality Evidence: Enterprise Alliance Chains Naturally Foster Industry Oligopoly

The network power seizure I describe is not a baseless conjecture; there are already complete examples in the real industry. There is a company that focuses on a one-click control alliance database, whose CEO publicly claims that its mission is to restore the industry status of traditional financial intermediaries. In a recent interview, he confidently stated that a closed enterprise alliance chain using authoritative proof mechanisms is fairer than an open public chain using proof of stake.

His logic is that participating in Ethereum consensus nodes requires a fixed cost (approximately $60,000 at current market prices), while joining his alliance network only requires new participants to “prove their commercial value” to existing members for admission.

But the reality is that Visa has long been integrated into this alliance network, while Mastercard has been excluded for a long time. How can a company prove its value to its biggest competitor? Further extrapolating: if Visa and Mastercard secretly form an alliance to jointly enter this network while blocking all other payment peers from entry, permanently consolidating their dual oligopoly position in the European and American payment arena, who can counterbalance that? How can fintech startups aiming to completely reshape the payment industry prove their value to this trillion-dollar industry giant? By merely begging humbly?

If you think my judgment is too harsh, it only indicates that you have not fully sorted through the development history of the payment clearing industry. You need not take my word for it; why not ask small banks and credit unions across the United States how they view clearinghouses; ask banks that are not EWS shareholders about their true opinions on the Zelle platform; inquire about Robinhood's situation when it faced trading restrictions from NSCC during the meme stock craze; or ask about the conflicts between Custodia Bank and the Federal Reserve, or the dissatisfaction of various fintech companies with the FedNow instant payment system.

Let’s consider the perspective of a CEO of a high-fee, high-margin payment giant. You are in a high position, and your core understanding is that controlling the network equals controlling everything in the industry; this truth has long been ingrained in your bones. Before the advent of crypto technology, all settlement systems worldwide were either operated by traditional industry giants or controlled by governments influenced by lobbying from these giants. Now, with the emergence of public permissionless blockchains, many smart people in the industry introduce you to this settlement system that is not controlled by any single entity, and all market participants can use it equally—your core competitors and all startups eyeing your high profits can all access it without barriers.

Ask yourself, what choice would you make? Would you honestly embrace this new technology that would completely undermine your industry advantages? Or would you launch a compromise hybrid solution, superficially retaining some surface characteristics of blockchain while firmly grasping network control and pricing power, then arrange a PR team to weave a narrative around regulatory compliance and preventing illegal transactions?

The answer is self-evident. From this perspective, the power seizure scenario I depict is not an extreme Machiavellian projection, but rather a routine operation in the industry day after day. Commercial enterprises will exhaust all means to seize competitive advantages, and fully controlling the settlement channels is the ultimate trump card. As long as there are loopholes in the network that capital can manipulate, enterprises will inevitably attempt to swallow them; for decentralized public chains that cannot be controlled, they will spread false negative rumors and initiate endless legal lawsuits for comprehensive suppression.

The True Intentions of Giants: Pseudo-Decentralization is Just a Short-Term Delay Tactic

However, from a long-term perspective, this set of game tactics will ultimately prove ineffective. It is not that enterprises are not adept at such commercial calculations, but rather that pseudo-decentralization solutions have inherent flaws that cannot be compensated for: their operational efficiency cannot match that of existing mature traditional financial systems, and their security baseline is far inferior to that of truly open and neutral public chains. The internal encryption modules of enterprise alliance chains are merely redundant fixtures, and the so-called consensus mechanisms are just a show for the outside world. These enterprise blockchains are only suitable for venture capital roadshows and industry forums to tell stories; once they enter real commercial environments, they will inevitably collapse completely.

From a Machiavellian perspective: banks and brokerages deeply involved in alliance chains actually know that this technology has no long-term development value. If this is indeed the case, their vigorous promotion of various pseudo-encryption schemes is merely a carefully designed delay tactic aimed at slowing the spread of decentralization technology and lobbying legislative bodies to set industry entry barriers. From a human nature perspective, it is easy to understand: the executives in charge of such traditional institutions are mostly older, nearing the end of their careers, and need to maintain their accumulated industry reputation while sustaining a comfortable lifestyle.

Such delay tactics can only be effective in the short term. Just as water ultimately flows to the lowest point, the market will eventually fully embrace the infrastructure with the highest degree of decentralization. The high profits of centralized systems largely stem from the friction, inefficiency, and delays inherent in traditional business processes, all of which are breakthrough points for emerging decentralized technologies. This is also a set of realistic game logic: a fully decentralized settlement system is the strongest weapon for new players without the burdens of traditional technology and outdated business models to combat established industry giants. Coupled with the global public's diminishing trust in traditional finance and authoritative institutions, the overall process of decentralization technology will only accelerate.

Final Conclusion: Despite Its Flaws, Ethereum Remains the Best Solution Available

Water flows to lower places; assets in the market will continue to spontaneously flow towards the underlying infrastructure with the highest security, forming a Nash equilibrium after multiple parties' games. I remain committed to being a realist. While decentralized systems like Ethereum indeed have many flaws, and the operational costs of resisting capital capture are high with complex underlying mechanisms, compared to various enterprise alliance chains available on the market today, it is still the most comprehensive optimal solution. Many practitioners with idealistic visions will ultimately pay a painful price in the harsh realities of the industry.