Blockchain, with Bitcoin leading the charge, was supposed to be the antidote to the pitfalls of centralized financial systems, the kind that sparked the 2008 financial crisis. Satoshi Nakamoto designed Bitcoin to let people transact freely without needing to trust banks, governments, or any central authority (bitcoin.org). It was a revolution—technology that promised to hand power back to individuals, particularly in regions where centralized control often meant financial instability.

Yet, fast-forward to today, and there’s an ironic twist. The same systems that were meant to break free from centralized control are, in many cases, falling back into those very structures. It’s as if we’re trying to pour new wine into old wineskins, forcing revolutionary ideas into outdated molds.

Bitcoin and the Centralization of Wealth

Let’s take Bitcoin as an example. The vision was decentralized ownership, where everyone could be part of the network. But in practice, a large percentage of Bitcoin’s wealth is held by a small number of players. As Jason Dehni co-founder of Credbull, points out, 6.5% of wallets control 98% of all Bitcoin(CoinTelegram). This concentration of wealth mirrors the very problem Bitcoin was supposed to fix—too much power in the hands of too few.

MakerDAO and Ethereum: Regulatory Pressures Forcing Centralization

Then there’s MakerDAO, a leading player in the decentralized finance (DeFi) space, which recently introduced a freeze function to comply with regulatory demands. This function allows for centralized control over funds, which runs directly against the decentralized ethos MakerDAO once stood for(Cryptopolitan). Ethereum, too, has faced similar pressures, with some transactions being censored to align with U.S. sanctions(Cryptonews).

The technology was designed to be censorship-resistant, yet we’re seeing it conform to the old regulatory frameworks it was meant to avoid.

Rethinking Global Sanctions Governance

The tension between innovative decentralized systems and traditional regulatory frameworks is becoming more pronounced. The existing sanctions model, primarily influenced by Western nations like the U.S., struggles with the decentralized, borderless nature of blockchain technology. Traditional sanctions enforcement, which relies on centralized financial oversight, is often ineffective against decentralized networks that operate without central intermediaries.

This mismatch suggests a need for a global reevaluation of how sanctions are enforced. While the United Nations is frequently suggested as a neutral body for this role, its effectiveness is compromised by the significant influence of its permanent Security Council members, especially the U.S., who can shape sanctions to reflect their geopolitical interests.

A more feasible approach might be to develop a decentralized, multilateral framework that reduces the disproportionate influence of any single nation. This could include forming regional coalitions or creating a new international body specifically designed to oversee blockchain-based financial systems. Such a framework would ensure that sanctions are enforced fairly and transparently, aligning with the decentralized nature of the technologies they aim to regulate. This approach would distribute governance and oversight in a way that mirrors the global and borderless characteristics of modern financial technologies (World Economic Forum).

Moving Forward: Adapting to New Systems

As decentralized technologies continue to evolve, we must ask ourselves: are we trying too hard to make these innovations fit into outdated frameworks? Instead of forcing decentralization into old regulatory structures, we should be building new systems that respect the nature of these technologies. This means:

1. International Collaboration: Creating global frameworks that recognize the decentralized nature of blockchain without enforcing outdated regulatory control.
2. Inclusive Governance: Encouraging more distributed decision-making to prevent centralization within decentralized systems.
3. Innovative Solutions: Continuously improving blockchain technology to enhance decentralization and reduce reliance on centralized nodes or validators.

Final thoughts

Blockchain was created to offer a decentralized alternative to the centralized systems that failed us in 2008. But today, we’re seeing these revolutionary ideas being squeezed into the same structures they were designed to escape. The key moving forward is not to make blockchain fit into old molds, but to adapt our systems to embrace decentralization’s full potential.

Is it realistic to envision a future where global financial control and governance are entirely decentralized? What are you thoughts?