Vitalik slams fake decentralization in crypto, says founders build ‘straw houses’

Ethereum co-founder Vitalik Buterin called out the growing trend toward centralization in the crypto industry.

Decentralization is at the core of blockchain technology, but the industry is losing sight of it. At the annual Ethereum Community Conference on Wednesday, June 2, Ethereum co-founder Vitalik Buterin called out the growing trend toward centralization in crypto.

While a vision of privacy, freedom, and transparency fueled early crypto, things could take a different turn, Buterin cautioned. He drew a parallel with Web 1.0, the early version of the internet, which evolved into something very different from its original ideals.

“And I mean, a lot of the ways that the internet turned out in general ended up being very different from the early types of web 1.0 visions. That happens, right, both in terms of government control and also it serves as corporate control,” Vitalik Buterin, Ethereum Foundation.

This shift is not just a concern for user empowerment, Buterin added—it is also a security risk. Many startups build decentralized applications with centralized frontends, such as websites and mobile apps. Buterin referred to these dApps as “straw houses,” arguing that attackers can easily compromise centralized front ends.

You might also like: EthCC: Vitalik Buterin believes crypto has reached an ‘inflection point’

Decentralization standards need to get higher: Buterin

Buterin emphasized that decentralization is not merely about having many validators or DAO voting mechanisms. Instead, he pointed to the “walkaway test” as the real measure of decentralization—that is, whether an app would still function if its core team disappeared.

“Basically, if your company in all of its servers suddenly disappear, do your users still have their assets? This is like the most baseline thing that you should be trying to get out of your assets,” Buterin explained.

Interestingly, the idea echoes the logic behind the SEC’s Howey Test, which is used to determine whether a financial instrument, including a crypto token, qualifies as a security.

Read more: Exclusive: Vitalik Buterin’s take on the ‘AI versus humans’ debate