A recent report from the European Central Bank is facing pushback from legal scholars over how it assesses decentralization in the cryptocurrency world.
The paper argues that major decentralized finance protocols are actually heavily centralized.
Bill Hughes, a lawyer for Consensys, argues that the decision relies on insufficient information and creates an unreasonably strict standard for businesses in the crypto industry.
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He pointed out that the discussion doesn’t offer any clear answers about whether centralization or decentralization is better. Instead, it presents data followed by someone’s interpretation of what that data means.
Too centralized?
A study funded by the European Central Bank examined how leading blockchain protocols like Aave, MakerDAO, Ampleforth, and Uniswap are governed and managed.
The study found that despite governance tokens being spread among many users, a small group still holds most of the voting power.
The research shows that the top 100 token holders control over 80% of the voting power across all four of the studied platforms.
The top five wallets alone control between 36 percent and 59 percent of the supply.
The study also states that most active voters are delegates (not identifiable end users).
As the researchers point out, this setup makes the system unclear and allows a small group connected to the core rules to gain complete control.
Subjective interpretation
Hughes criticized the report for interpreting the data in a way that seemed based on personal opinions rather than facts. He pointed out that the authors shared their own views on how decentralized the metrics were, meaning there wasn’t a clear, unbiased standard for comparison.
In my research, I’ve come to define true decentralization as software that runs completely on its own, and can’t be changed once it’s operating. This sets a very high bar – one that almost no projects currently meet. As a result, it significantly limits what regulators might consider truly outside of their control.
The study also has some important limitations with its data. Because the information was gathered manually from public sources and places where identities were hidden, there are significant gaps in what we know.
Hughes pointed out that the data they used was gathered manually from public sources, and public financial data often has issues with privacy and completeness. They acknowledge the possibility of errors or missing details, essentially admitting that flawed input can lead to unreliable results. He commended them for being upfront about this limitation.
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2026-03-27 21:03