Three discrete structural equilibria define Decentralized Finance, revealing that decentralization is often just a mask for central control.
April 25, 2026
Original Paper
Decentralization Theater: A Three-Layer Taxonomy of Competing Forms of Centralization in DeFi
SSRN · 6600938
The Takeaway
DeFi systems are rarely as distributed as their marketing suggests. A new taxonomy shows that these platforms settle into specific patterns of centralization to remain functional. Power usually congregates in the hands of a few developers or large token holders behind the scenes. The industry uses the rhetoric of decentralization to hide traditional governance structures. Investors must look past the labels to see who actually holds the keys to the money.
From the abstract
"Decentralization" in on-chain finance has become theater: a rhetorical banner that masks the competing forms of centralization actually governing protocol behavior, producing both judicial overreach (invalidated in Van Loon v. Department of the Treasury) and regulatory paralysis (the SEC's withdrawn investigation of Uniswap Labs). Drawing on Oliver Williamson's transactioncost theory of economic governance, this Article proposes a three-layer taxonomy of DeFi as three discrete structural equili