centralization

Meta Financial AI stated on platform X that when exchanges encounter significant crises, their platform tokens often suffer the most impact first, citing the price performance of tokens after security incidents involving FTX, WazirX, and Bitget as examples. Binance experienced a $6.3 billion hack on October 29, marking the largest hacking incident in the history of the cryptocurrency industry, approximately 16 times the losses Bitget faced in its previous attack. However, over the past 30 days (including the period during the hacking incident), SOL, XRP, ETH, BTC, and BNB fell by 18.3%, 16%, 9.7%, 7.4%, and 5.7% respectively, with BNB experiencing the smallest decline.Zhao Changpeng responded by stating that the price trends of most crypto assets are generally synchronized, with only minor percentage differences; the impact on one asset can ripple through the entire industry, making internal conflicts within the industry meaningless. He called for the cryptocurrency industry to be "decentralized but united."

a16z Chief Legal Counsel Miles Jennings posted on X that the U.S. Securities and Exchange Commission (SEC) has released new FAQs that further clarify its token classification framework. He pointed out that Question 1.4 clearly states that systems can maintain decentralized governance and use legal entities such as DUNA; Question 1.5 distinguishes between licensed and unlicensed systems; and Question 1.6 clarifies the difference between "functional" and "decentralized."The SEC's Division of Corporation Finance updated the relevant Q&A on November 2. The response to Question 1.4 states that participants in a widely governed functional crypto system, if not interconnected and without formal or informal collaborative arrangements other than participating in that governance system, typically do not constitute a group of persons or entities defined as "centralized parties"; even if they do form such a group, they must still possess operational, economic, or voting control to meet the definition of "centralized parties." This conclusion also applies to cases where the governance system belongs to an organization, association, or foundation, and participation is based on holding native crypto assets.The response to Question 1.5 states that centralized party oversight of participants refers to the authority to control access to the system at the protocol, validator, or user level, such as unilaterally granting or restricting access, deciding on upgrade voting procedures, controlling who can participate in consensus, or modifying rule code, revoking transactions, and access. The response to Question 1.6 states that "functional" refers to native crypto assets being usable according to the system's programmed purposes, while "decentralized" refers to the system operating autonomously without any person, entity, or group having operational, economic, or voting control; the two are distinct concepts. The above responses represent the views of the staff of the Division of Corporation Finance and do not constitute SEC rules or statements.

According to Bloomberg, on October 31, 2008, Satoshi Nakamoto released the Bitcoin white paper, proposing a peer-to-peer electronic payment system that does not require the participation of banks or central institutions. Over the past 18 years, Bitcoin has evolved from a marginal experiment in early dark web and forums to an asset class recognized by Wall Street and institutional investors. In October last year, there was still $19 billion in leveraged positions liquidated in a single day, and the crypto winter of 2022 caused the market value of digital assets to evaporate by more than $2 trillion.On the 18th anniversary of the Bitcoin white paper's release, the price of Bitcoin hovers around $80,000, facing its worst month since June.Today, the Bitcoin ETF launched by BlackRock has reached a scale of approximately $66 billion, with several publicly listed companies incorporating Bitcoin into their balance sheets. Traditional financial institutions are also actively laying out stablecoins, asset tokenization, and blockchain financial infrastructure. However, this development also brings a certain contrast: Bitcoin was originally intended to challenge the centralized financial system, but it is now increasingly being accepted by traditional financial institutions.

The Bitcoin ecosystem blockchain Core officially announced that the project is entering the next stage of decentralization. Since the DAO began transferring block production responsibilities to independent validators, the network has maintained zero downtime during the transition period. The official statement indicates that decentralization has been the direction of Core since the genesis block, and various affairs of the DAO are gradually being handed over to independent community operators.As part of this transition, early contributors Rich Rines and Brendon Sedo will step down from their DAO positions. The community will take on greater management responsibilities in areas such as ecological construction, growth plans, and directional decision-making. The official also stated that in the coming months, there will be more independent operators, community-led projects, and Coretoshi involved in shaping the future development of Core.

The Blockchain Association submitted a letter to the SEC regarding the "Regulation of Crypto Assets" proposal, suggesting raising the startup exemption limit to $10 million and the fundraising exemption to $150 million (supporting on-chain transparency as an alternative to audits and excluding airdrops), and establishing a third-party registration safe harbor for existing tokens.The Blockchain Association calls for clear objective decentralization standards for tokens to escape the "investment contract" attribute (such as open source and no unilateral review rights), while strengthening federal regulations' priority jurisdiction over state legislation, supporting 24/7 trading on exchanges and self-custody.

Slow Fog's Yuxian stated on platform X that the Bitget theft incident has a wide spread, involves a huge amount of money, and the related funds were quickly linked to North Korean hackers. Institutions such as Circle and Tether have promptly assisted in freezing the related funds, with Circle freezing the USDC held by the hackers.Regarding THORChain, Yuxian pointed out that when THORChain previously experienced a theft incident, it also quickly intervened in its so-called "decentralized" platform; however, in response to this major security incident in the industry, it claimed "decentralization and non-interference" and compared itself to Bitcoin and Ethereum, while continuing to earn fees from the hackers' large cross-chain transactions.He stated that decentralization should not just be a slogan; after a major security incident occurs, the key is to distinguish which issues need to be collectively addressed by the industry. He also believes that platforms like THORChain should not be easily compared to Bitcoin and Ethereum, as there are significant differences in the degree of decentralization and mechanisms of different systems.

Renowned analyst PlanB expressed opposition to the Bitcoin BIP-110 proposal, believing that those supporting the fork do not truly understand the decentralized nature of Bitcoin.The proposal aims to temporarily limit non-payment data on-chain through a soft fork, with the current miner support rate at approximately 1%.

Blockstream co-founder Adam Back commented on the controversy within the Bitcoin community regarding BIP 110, stating that he understands and sympathizes with the concerns of those supporting BIP 110, who hate spam transactions and want to protect the network. However, the proposal is essentially an act of "trying to monitor others," which would erode Bitcoin's decentralization, security, and neutrality, fundamentally conflicting with the spirit of Bitcoin.In response, Michael Saylor retweeted and stated, "There are 110 things more dangerous to Bitcoin than spam. BIP 110 turns the spam controversy into a consensus change, which will invalidate some currently valid transactions that have paid fees. This precedent is the real danger, and we should focus our energy on the truly important threats."Previously, David Bailey, chairman of the Bitcoin Treasury Company Nakamoto and chairman of Bitcoin Magazine, stated that the failure of the so-called "BIP-110" long-standing controversy constitutes an "extreme benefit" for Bitcoin and believes this further validates the network's resistance to attacks and splits.

As the first federally chartered crypto bank in the United States, Anchorage Digital has stated that it will reduce its involvement in the Global Dollar (USDG) stablecoin alliance and will no longer play a more prominent role as it did previously. Members of the alliance include institutions such as Robinhood, Kraken, Galaxy Digital, OKX, and Visa Inc.Nathan McCauley, co-founder and CEO of Anchorage, stated that the company will adopt "a higher degree of neutrality" in the stablecoin issuance space in the future, avoiding targeted support for any single stablecoin to accommodate its expansion as a white-label issuance and custody platform. He pointed out that as more institutions seek to issue stablecoins through Anchorage (with about 20 potential partners currently), the company needs to reassess its incentive structures and alignment of interests.Currently, USDG is issued by Paxos Digital Singapore and regulated by the Monetary Authority of Singapore, with a circulation size of approximately $3 billion. Market participants generally believe that stablecoin issuance is entering a new phase of parallel development among multiple institutions and networks.

Helius CEO mert posted on platform X, stating that decentralization is essentially "coordination without a central authority." If the cost of coordination is close to zero, then it is effectively centralized; if the cost of coordination is infinitely high, then it technically cannot be called decentralized, as the system would not function properly.mert illustrated this point through a thought experiment: suppose there currently exists a highly decentralized blockchain with hundreds of thousands of nodes running from home, distributed mining power, and token supply. He then proposed another extreme hypothesis—if North Korea could transfer funds from wallet A to wallet B within time T, then this would be equivalent to that chain being able to simultaneously detonate nuclear weapons in most countries around the world.Finally, assuming that the blockchain could successfully freeze the funds in wallet A through a fork without causing mass casualties, would this blockchain still be considered decentralized? mert believes that although humanity can achieve coordination due to the shared incentive of "not dying," this does not mean that the chain is "unorganized." Decentralization is still fundamentally "coordination without a central authority."

According to a report by Cointelegraph, a staff paper from the European Central Bank points out that the governance tokens of DeFi protocols are highly centralized, with about half or more of the holdings of governance tokens for Aave, MakerDAO, Ampleforth, and Uniswap related to the protocol itself or exchanges.The main voting participants are mostly delegated representatives, and in many cases, these representatives cannot be identified or associated with the token holders. The study questions whether DeFi DAOs have sufficient decentralization to be excluded from the MiCA regulatory framework and provides a reference for policymakers to include relevant entities in regulation.

According to The Street, veteran investor Simon Dixon publicly criticized the Bitcoin accumulation strategy promoted by Michael Saylor, stating that it may exacerbate the centralization risk of Bitcoin.Currently, Strategy holds approximately 762,000 BTC, accounting for over 3% of the total supply. The company recently launched a $42 billion ATM financing plan, intending to continue accumulating Bitcoin.Dixon pointed out that this model deeply binds Bitcoin to the traditional financial system, making it more susceptible to short-term trading and price manipulation, deviating from the original intention of decentralization. He suggested returning to self-custody and long-term holding strategies, rather than centralized allocation through publicly listed companies.

Ethereum co-founder Vitalik Buterin recently published a series of technical articles discussing the future roadmap of Ethereum. In the latest article, he focused on analyzing the potential centralization risks in the block building pipeline and proposed solutions such as expanding the FOCIL mechanism and introducing encrypted mempools to enhance the network's censorship resistance.According to the plan, Ethereum will launch the Glamsterdam upgrade in the first half of 2026, which will introduce the enshrined Proposer-Builder Separation (ePBS) mechanism. This mechanism allows block proposers to outsource block construction to a permissionless open market, reducing the centralization risk at the staking level. However, Buterin pointed out that while ePBS can prevent the concentration of block building rights among a few staking pools, the block construction itself may still become concentrated among a few high-tier participants due to specialization and maximizing MEV, leading to a new trend of centralization.To address this issue, Ethereum developers plan to simultaneously launch the FOCIL (Forward Obligatory Commitment to Inclusion Lists) mechanism in the Glamsterdam upgrade. The initial version will randomly select 16 witnesses and mandate that specific transactions must be included in the block; otherwise, the block will be rejected. Buterin stated that even if block construction is controlled by a single malicious entity, FOCIL can still ensure that transactions cannot be completely censored.Additionally, Buterin explored the possibility of expanding the scale of FOCIL ("big FOCIL") and introducing encrypted mempools to further mitigate the issues of information asymmetry and power concentration in the block building process. Recently, Buterin has been vocal about topics such as the quantum resistance roadmap, execution layer improvements, and block building mechanisms, indicating that the core Ethereum development team is conducting systematic design and risk assessment for the next phase of protocol upgrades.