Vitalik: Decentralization does not lose commerciality, a "symbiotic" solution from the perspective of power balance

Original Author: Vitalik Buterin

Original Translation: Saoirse, Foresight News

Many of us harbor a wariness towards "Big Business." We appreciate the products and services provided by companies, yet we resent the trillion-dollar monopolistic closed ecosystems, the quasi-gambling nature of video games, and those corporations that manipulate entire governments for profit.

Many of us also fear "Big Government." We need police and courts to maintain public order, and we rely on the government to provide various public services, yet we are dissatisfied with the government arbitrarily designating "winners" and "losers," restricting people's freedom of speech, reading, and even thought, and we oppose government violations of human rights or waging wars.

Finally, many of us are also afraid of the third corner of this triangle: the "Big Mob." We recognize the value of independent civil society, charitable organizations, and Wikipedia, yet we detest mob justice, cultural boycotts, and extreme events like the French Revolution or the Taiping Rebellion.

Essentially, we long for progress—whether in technology, economy, or culture—but we also fear the three core forces that have historically driven this progress.

To break this deadlock, a common approach is the idea of power balance. If society needs strong forces to drive development, then these forces should balance each other: either through internal balance within a single force (such as competition among companies) or through checks and balances between different forces, ideally combining both.

Historically, this balance has largely formed naturally: due to geographical distance limitations or the need to coordinate large-scale human efforts to accomplish global tasks, the natural phenomenon of "diseconomies of scale" has constrained excessive concentration of power. However, in this century, this rule no longer holds: the three aforementioned forces are simultaneously becoming increasingly powerful and inevitably interacting with each other frequently.

In this article, I will delve into this topic and propose several strategies to safeguard the increasingly fragile characteristic of "power balance" in today's world.

In a previous blog post, I described this emerging world where "Big X" will long exist in all fields as a "dense jungle."

Why We Fear Big Government

People's fear of government is not unfounded: governments wield coercive power and are fully capable of causing harm to individuals. The power that governments have to destroy individuals is far beyond what Mark Zuckerberg or cryptocurrency practitioners could ever hope to possess. This is why, for centuries, liberal political theory has revolved around the core issue of "taming the Leviathan"—enjoying the benefits of government maintaining law and order while avoiding the pitfalls of "a monarch who can arbitrarily dispose of subjects."

(Taming the Leviathan refers to the political concept of constraining the government, which possesses strong coercive power but may infringe on individual rights, through institutional designs such as the rule of law, separation of powers, and decentralization, ensuring its function of maintaining social order while preventing power abuse and balancing public order with individual freedom.)

This theoretical framework can be distilled into one sentence: the government should be a "rule-maker" rather than a "game player." In other words, the government should strive to be a reliable "playing field" that efficiently resolves interpersonal disputes within its jurisdiction, rather than an "actor" pursuing its own goals.

There are various paths to achieve this ideal state:

• Libertarianism: believes that the rules the government should enforce essentially boil down to three—no fraud, no theft, no murder.
• Hayekian liberalism: advocates avoiding central planning; if intervention in the market is necessary, it should be goal-oriented rather than method-specific, leaving implementation to market exploration.
• Civil libertarianism: emphasizes freedom of speech, religion, and association, preventing the government from imposing its preferences in cultural and ideological domains.
• Rule of law: the government should clearly define what is permissible and impermissible through legislation, with courts responsible for enforcement.
• Supremacy of common law: advocates for the complete abolition of legislative bodies, with a decentralized court system making rulings on individual cases, each ruling forming a precedent that gradually evolves the law.
• Separation of powers: divides government power into multiple branches, with mutual oversight and checks among them.
• Subsidiarity principle: posits that issues should be resolved by the most localized and capable institutions, minimizing the concentration of decision-making power.
• Multipolarity: at least avoids a single nation dominating globally; ideally, it should achieve two additional checks:

1. Prevent any nation from forming excessive hegemony in its region;
2. Ensure that every individual has multiple alternative "backup options."

Even in governments that are traditionally not "liberal," similar logic applies. Recent studies have found that "institutionalized" governments classified as "authoritarian" often promote economic growth more effectively than "personalized" governments.

Of course, completely avoiding the government becoming a "game player" is not always achievable, especially in the face of external conflicts: if "players" declare war on the "rules," the ultimate victor will inevitably be the "players." However, even when the government needs to temporarily assume the role of a "player," its power is usually subject to strict limitations—such as the "dictator" system in ancient Rome: dictators had significant power during emergencies, but once the crisis was resolved, power would revert to normalcy.

Why We Fear Big Business

Criticism of businesses can be succinctly categorized into two types:

1. Businesses are bad due to their "inherent evil."
2. Businesses are bad due to their "lack of vitality."

The root of the first type of issue (the "evil" of businesses) lies in the fact that businesses are essentially efficient "goal-optimizing machines," and as their capabilities and scale expand, the core goal of "profit maximization" increasingly diverges from the goals of users and society as a whole. This trend is clearly observable in many industries: the early stages of an industry are often driven by enthusiasts, full of vitality, but over time, they gradually become profit-oriented, ultimately conflicting with user interests. For example:

Left image: The proportion of tokens directly allocated to insiders among newly issued cryptocurrencies from 2009 to 2021; Right image: The concentration of tetrahydrocannabinol (THC, the psychoactive component) in cannabis from 1970 to 2020.

The video game industry also exhibits this trend: this field, initially centered on "fun and achievement," increasingly relies on built-in "slot machine mechanisms" to extract maximum funds from players. Even mainstream prediction markets are beginning to show concerning tendencies: no longer focusing on "optimizing news media" or "improving governance," but rather concentrating on sports betting.

The aforementioned cases stem more from the combination of enhanced business capabilities and competitive pressures, while another category of cases is directly related to the expansion of business scale. Generally speaking, the larger a business is, the more capable it is of distorting its surrounding environment (including economic, political, and cultural aspects) to achieve its own interests. A business that expands tenfold can, to some extent, increase the benefits gained from distorting the environment by tenfold—thus, it will engage in such behavior far more frequently than smaller businesses, and once it acts, the resources it deploys will also be ten times that of smaller businesses.

From a mathematical perspective, this aligns with the logic of "why monopolistic businesses set prices above marginal costs, increasing profits at the expense of social welfare": in this scenario, "market price" is the distorted "environment," and monopolistic businesses distort the environment by limiting sales. The strength of distortion capability is proportional to market share. But in more general terms, this logic applies to various scenarios, such as corporate lobbying, De Beers-style cultural manipulation activities, etc.

The second type of issue (the "lack of vitality" of businesses) manifests as businesses becoming dull and risk-averse, resulting in large-scale homogenization both within and between businesses. (The uniformity of architectural styles is a typical manifestation of the "lack of vitality" in businesses.)

Architectural uniformity is a typical form of business mediocrity.

The term "soulless" is interesting—it implies a meaning that lies between "evil" and "lack of vitality." Describing a business as "addicting users for clicks," "forming cartels to raise prices," or "polluting rivers" fits perfectly; while using it to describe a business as "making global cities look the same" or "producing ten Hollywood movies with similar plots" is equally fitting.

I believe that both types of "soulless" phenomena stem from two factors: common motives and institutional commonality. All businesses are highly driven by "profit motives," and if many powerful entities share the same strong motive without strong counterbalancing forces, they will inevitably move in the same direction.

"Institutional commonality" arises from the expansion of business scale: the larger a business is, the more motivated it is to "shape the environment." A business valued at $1 billion will invest far more in "shaping the environment" than 100 businesses valued at $10 million each; at the same time, scale expansion will also exacerbate homogenization—the contribution of Starbucks to "urban homogenization" far exceeds the combined contributions of 100 competitors each only 1% of its size.

Investors may exacerbate these two trends. For a (non-antisocial) startup founder, growing a business to a $1 billion scale and benefiting the world is more satisfying than growing it to a $5 billion scale while harming society (after all, the yachts and planes that $4.9 billion can buy are not worth trading for "being hated by the world"). However, investors are further removed from the "non-financial consequences" of their decisions: as market competition intensifies, investors willing to pursue a $5 billion scale will receive higher returns, while those satisfied with a $1 billion scale will receive lower (or even negative) returns, making it difficult to attract funding. Additionally, investors holding shares in multiple portfolio companies often inadvertently push these companies to form a "merged super entity" to some extent. However, both trends face an important limiting factor: investors' "monitoring ability" and "accountability" regarding the internal situations of their portfolio companies are limited.

At the same time, while market competition can alleviate "institutional commonality," whether it can alleviate "motive commonality" depends on whether different competitors possess "non-profit-oriented differentiated motives." In many cases, businesses indeed have such motives: for example, sacrificing short-term profits in the name of "publicly sharing innovative results," "upholding core values," or "pursuing aesthetic values." But this situation does not necessarily occur.

If "motive commonality" and "institutional commonality" lead businesses to be "soulless," then what exactly is "soul"? I believe that in the context of this article, "soul" essentially refers to diversity—specifically, the non-homogeneous characteristics among businesses.

Why We Fear the Big Mob

When people talk about "civil society"—the part of society that is neither profit-oriented nor governmental—they often describe it as "composed of numerous independent institutions, each focusing on different areas." If artificial intelligence were to explain "civil society," it would likely provide similar examples.

However, when people criticize "populism," the opposite scene often comes to mind: a charismatic leader inciting millions to follow them, forming a large group pursuing a single goal. Populism, while claiming to represent the "common people," fundamentally constructs the illusion of "people united as one"—and this "unity" often manifests as support for a particular leader and opposition to a "hated external group."

Even when people criticize civil society, the arguments always revolve around "its failure to achieve the mission of 'numerous independent institutions excelling in their own areas,' instead promoting some spontaneously formed common agenda"—for example, the phenomenon criticized by the "Cathedral" theory.

Balance Between Forces

In all the aforementioned cases, we are discussing the power balance within each of the three "forces." However, different forces can also form checks and balances, with the most typical case being the power balance between government and business.

Capitalist democratic systems are essentially a theory of power balance between "Big Government" and "Big Business": entrepreneurs have legal tools to challenge government actions, while also gaining the ability to act independently through capital concentration, and the government can regulate businesses.

"Palladium-ism" venerates billionaires but specifically refers to those who "act unconventionally to pursue their specific visions rather than directly seeking profit." From this perspective, "Palladium-ism" can be seen as an attempt to "obtain the benefits of capitalism while avoiding its drawbacks."

Although both government and the market created the necessary conditions for the "Starship" project, it was ultimately neither profit motives nor government directives that drove its birth.

My personal view on philanthropy is somewhat similar to "Palladium-ism." I have repeatedly expressed support for billionaires engaging in philanthropy and hope for more people to get involved. However, the philanthropy I advocate is one that can "balance other social forces." The market often hesitates to fund public goods, while the government is often reluctant to fund projects that "have not become elite consensus" or "whose beneficiary groups are not concentrated in a single country." Some projects fit both characteristics and are thus overlooked by both the market and the government—wealthy individuals can fill this gap.

However, billionaire philanthropy can also take a harmful direction: when it ceases to be a "counterbalancing force" to the government and instead replaces the government in wielding power. In recent years, Silicon Valley has witnessed such a shift: powerful tech company CEOs and venture capitalists have become less committed to liberalism and "exit mechanisms," instead directly pushing the government towards their preferred goals—in exchange, they have made the world's most powerful government even more powerful.

I prefer the scene on the left (2013) over the scene on the right (2025): because the left reflects a power balance, while the right shows two powerful factions that should counterbalance each other merging instead.

The other two groups of forces in the triangle can also form a power balance. The concept of the "Fourth Estate" proposed during the Enlightenment essentially positions civil society as a force to counterbalance government power (at the same time, even without censorship, power can flow in reverse: the government can profoundly influence educational content by funding primary and secondary schools and universities, especially in primary and secondary education). On the other hand, the media reports on business dynamics, and successful business figures often provide funding support to the media. As long as there is no monopoly of power in a single direction, these mechanisms are healthy and can enhance societal resilience.

Power Balance and Economies of Scale

If we seek an argument that can explain both the rise of the United States in the 20th century and the development of China in the 21st century, the answer is simple: economies of scale. This point is often used by individuals from both the U.S. and China to criticize Europe: Europe has many small and medium-sized countries with diverse cultures, languages, and systems, making it difficult to cultivate large enterprises that cover all of Europe; whereas in a large, culturally homogeneous country, businesses can easily scale up to hundreds of millions of users.

The impact of economies of scale is crucial. At the level of human development, we need economies of scale—because it is the most effective way to drive progress to date. But economies of scale are also a double-edged sword: if my resources are double yours, the progress I can achieve will be more than double; thus, by next year, my resources may become 2.02 times yours. Over time, the most powerful entities will ultimately control everything.

Left image: Proportional growth—small initial differences will ultimately remain small; Right image: Growth under economies of scale—small initial differences will become significantly larger over time.

Historically, two forces have countered the impact of economies of scale, preventing them from leading to power monopolization:

• Diseconomies of scale: large institutions are inefficient in many ways, such as internal conflicts of interest, communication costs, and costs arising from geographical distance.
• Diffusion effects: as people move between businesses and countries, they carry away their ideas and skills; underdeveloped countries can achieve "catch-up growth" through trade with developed countries; industrial espionage is ubiquitous, and innovative results can be reverse-engineered; businesses can use one social network to drive traffic to another.

If we liken "scale leaders" to cheetahs and "scale laggards" to turtles, then "diseconomies of scale" will slow down the cheetah, while "diffusion effects" act like a rubber hand, pulling the turtle closer to the cheetah. However, in recent years, several key forces have been changing this balance:

• Rapid technological advancement: making the "super-exponential growth curve" of economies of scale steeper than ever before.
• Automation: allowing global tasks to be completed with minimal manpower, significantly reducing coordination costs.
• The proliferation of proprietary technology: modern society can produce proprietary software and hardware products that are "open for use but not for modification or control." Historically, delivering products to consumers (whether domestically or internationally) necessarily meant allowing for inspection and reverse engineering—but this rule no longer holds.

Essentially, the effects of economies of scale are continuously strengthening: although the breadth of "idea diffusion" may exceed that of the past due to the influence of internet communication, the "diffusion of control" is weaker than ever.

The core dilemma: in the 21st century, how do we achieve rapid progress and build a prosperous civilization while avoiding extreme concentration of power?

The solution: forcibly promote more "diffusion."

What does "forcibly promote more diffusion" specifically refer to? First, we can look at several government policy examples:

• The EU's mandatory standardization requirements (such as the recently implemented USB-C interface standard): which increase the difficulty of constructing "proprietary ecosystems incompatible with other technologies."
• China's mandatory technology transfer rules.
• The U.S. ban on non-compete agreements: I support this policy because it forces the "tacit knowledge" within businesses to achieve a degree of "open-sourcing"—employees can apply the skills learned at one business to other fields after leaving, benefiting more people. While confidentiality agreements may limit this process, fortunately, they are riddled with loopholes in practice.
• Copyleft licenses (such as the GPL): require that any software developed based on Copyleft code must also adopt an open-source model and be subject to Copyleft licensing.

We can also propose more ideas along this direction: for example, the government could design a new tax mechanism based on the "EU Carbon Border Adjustment Mechanism"—levying corresponding taxes on domestic and foreign products based on their "degree of proprietary nature" (through some measurement standard); if a business shares technology with society (including through open-sourcing), the tax rate could be reduced to zero. Another idea worth reviving is the "Intellectual Property Haberg Tax" (taxing intellectual property based on valuation to incentivize owners to utilize intellectual property efficiently).

Additionally, we should adopt a more "flexible" strategy: adversarial interoperability.

As Cory Doctorow (a well-known science fiction writer, blogger, and journalist) explains:

"Adversarial interoperability refers to developing new products/services that can interface with existing products/services without obtaining permission from the existing manufacturers. Examples include third-party printer ink, alternative app stores, or independent repair shops using compatible parts produced by competitors to provide repair services for cars, phones, or tractors."

Essentially, this strategy is about "interacting with tech platforms, social media sites, businesses, and governments in an unlicensed manner while benefiting from the value they create."

Specific examples might include:

• Alternative clients for social media platforms: users can view others' posts, publish their own content, and choose their content filtering methods independently through these clients.
• Browser extensions with the same functionality: similar to ad blockers, but specifically targeting AI-generated content on platforms like X.
• Decentralized anti-censorship exchanges between fiat currencies and cryptocurrencies: these exchanges can alleviate the "bottleneck risk" of centralized financial systems (the problem of a single point of failure causing the entire system to collapse).

Overall, much of the value capture in Web2 occurs at the user interface level. Therefore, if we can develop "alternative interfaces that can interoperate with platforms and other users utilizing existing interfaces," users can remain within the network while avoiding the platforms' value extraction mechanisms.

Sci-Hub is a typical tool for "forcibly promoting diffusion"—it has undoubtedly played an important role in enhancing fairness and openness in the scientific field.

The third strategy to enhance "diffusion effects" is to return to the concept of "diversity" proposed by Glen Weyl and Audrey Tang. They describe this concept as "facilitating collaboration between differences"—allowing people with differing views and goals to communicate and cooperate better, enjoying the efficiency gains of "joining large groups" while avoiding the pitfalls of "large groups becoming single-goal-driven entities." Such concepts can help open-source communities, national alliances, and other non-monolithic groups enhance their "diffusion levels," allowing them to share more economies of scale benefits while remaining competitive against more tightly organized centralized giants.

It is worth noting that this line of thought structurally resembles Piketty's theory of "r > g" (the return on capital exceeds the growth rate of the economy) and his advocacy for "solving wealth concentration issues through a global wealth tax (and strengthening public services)." The core difference between the two is that we are not focusing on "wealth" itself, but tracing upstream to the "sources of unrestricted wealth concentration"—what we want to diffuse is not money, but the means of production.

I believe this line of thought is superior for two reasons: first, it directly addresses the "dangerous core" (the combination of "extreme growth" and "exclusivity"), and if executed properly, it could even enhance overall efficiency; second, it is not limited to targeting a specific type of power—while a global wealth tax may prevent the concentration of power among billionaire groups, it cannot constrain authoritarian governments or other multinational entities, and may even leave us more defenseless in the face of these forces. In contrast, "forcibly promoting technological diffusion through global decentralized strategies"—clearly informing all parties that "either grow with us and share core technologies and network resources at a reasonable pace, or develop in complete isolation and be excluded by us"—can comprehensively address the issue of power concentration.

D/acc: Making a Multipolar World Safer

Pluralism faces a theoretical risk known as the "fragile world hypothesis": as technology advances, more and more entities may possess the capability to "cause catastrophic harm to all humanity"; the weaker the world's coordination, the higher the probability that a particular entity will ultimately choose to implement such harm. In response, some believe the only solution is to "further concentrate power"—but this article advocates precisely for "reducing power concentration."

D/acc (Defensive Accelerationism) is a complementary strategy that allows the goal of "reducing power concentration" to be achieved more safely. Its core is "building defensive technologies that develop in sync with offensive technologies," and these defensive technologies must be open and inclusive, allowing everyone to access them—by doing so, we can reduce people's demand for power concentration driven by "security anxiety."

D/acc technology cube diagram

The Moral Perspective of Pluralism

The morality of enslavement holds that: you are not allowed to become powerful.

The morality of the master holds that: you must become powerful.

In contrast, a comprehensive moral perspective centered on power balance may argue: you are not allowed to form hegemony, but you should pursue positive impact and empower others.

This view is essentially a reinterpretation of the dichotomy of "empowerment rights" and "control rights" that has existed for hundreds of years.

To achieve "having empowerment rights without exercising control rights," there are two paths: one is to maintain a high degree of "diffusion" towards the external world; the other is to minimize the possibility of being "used as a leverage of power" when constructing systems.

In the Ethereum ecosystem, the decentralized staking pool Lido is a good example. Currently, the amount of ETH staked managed by Lido accounts for about 24% of the total staked amount across the network, but people's level of concern about it is far lower than about "any other entity holding 24% of the staked amount." The reason is that Lido is not a single entity: it is an internally decentralized DAO, with dozens of node operators, and employs a "dual governance" design—ETH stakers have veto power over decisions. Lido's efforts in this direction are commendable. Of course, the Ethereum community has always made it clear that even with these safeguards, Lido should not control all of Ethereum's staked amount—currently, it is far from this risk threshold.

In the future, more projects should clearly consider two core questions: not only how to design a "business model"—that is, how to acquire resources to support their operations; but also how to design a "decentralization model"—that is, how to avoid becoming a node of power concentration and how to address the risks that come with holding power.

In some scenarios, decentralization is relatively easy to achieve: for example, few people mind the dominance of English, and few worry about the widespread use of open protocols like TCP, IP, and HTTP. However, in other scenarios, decentralization poses significant challenges—because certain application scenarios "require entities to have clear intentions and capabilities for action." How to retain the "flexibility advantage" while avoiding the "drawbacks of power concentration" will be an important challenge faced in the long term.

Special thanks to Gabriel Alfour, Audrey Tang, and Ahmed Gatnash for their feedback and review.