Ethereum’s Decentralization Dilemma: Power Concentrates as the Network Scales

Ethereum’s founding principle of decentralization is once again under scrutiny. Recent criticism from core developers has reignited questions about who truly controls the world’s most widely used blockchain. From the Ethereum Foundation’s funding power to the dominance of a few client teams and staking providers, the network’s internal structure reveals a paradox: to evolve efficiently, Ethereum increasingly depends on the very coordination it was built to avoid.

The Structural Reality: Who Actually Steers Ethereum

At its core, Ethereum governance combines open participation with quiet centralization. The Ethereum Foundation (EF) remains the most visible authority. It funds research, supports development teams, and defines broad technical priorities. The Foundation’s influence extends beyond finances. It also shapes the agenda for major upgrades and manages key communication channels.

Client teams add another layer of control. Geth, Nethermind, Besu, and Erigon maintain the software that keeps Ethereum running. Geth still powers most validator nodes, creating a subtle centralization risk. A bug or policy error in a dominant client could ripple through the entire network. Meanwhile, Vitalik Buterin remains the community’s intellectual center. His opinions often guide the development direction even without formal control.

That combination of funding power, software dominance, and social authority fuels one recurring question: who controls the Ethereum network?

Governance by Reputation: Inside Ethereum’s Governance Model

Unlike blockchains such as Tezos and Cosmos, Ethereum does not use on-chain voting. Its process is entirely social and off-chain. The AllCoreDevs calls, coordinated by figures like Tim Beiko, function as Ethereum’s informal parliament. Developers debate Ethereum Improvement Proposals (EIPs) and move upgrades forward when “rough consensus” forms.

This structure protects Ethereum from token-based plutocracy. Yet it also concentrates influence among a small number of respected developers. Outsiders can participate, but they rarely shape the outcome. Governance depends on reputation, not votes. That approach keeps decision-making efficient but feeds criticism that Ethereum decentralization now rests on trust in a few well-known figures.

Economic Dependence: The Funding Bottleneck

Money shapes power. Several developers have complained about “insanely low pay” from the Ethereum Foundation, arguing that contributors should not rely on unpredictable grants. Their frustration highlights a deeper issue: when one entity pays most of the bills, it also defines priorities.

The Protocol Guild was designed to fix that imbalance by distributing rewards based on contribution. Even so, EF funding remains dominant. Developers who depend on the Foundation inevitably adapt to its goals. This dynamic became visible during this year’s Ethereum Foundation controversy, when contributors called for greater transparency. It reminded the community that financial dependence creates hierarchy — even in decentralized systems.

>>> Read more: Ethereum Leadership Crisis: Reshuffle & Market Impact

Technical Centralization Vectors

Ethereum’s decentralization faces technical constraints as well. Validator and staking concentration remains significant. In 2025, five entities, including Lido, Coinbase, Binance, Kraken, and Figment, control more than half of all staked ETH. Although Lido’s share has slowly declined, the network’s consensus layer still relies on a small number of operators.

The MEV and PBS (Proposer-Builder Separation) pipeline adds another point of control. A majority of Ethereum blocks pass through a few relays such as Flashbots and Blocknative. Developers plan to solve this through enshrined PBS, integrating relays directly into the protocol, but the change is still in progress.

Ethereum’s Layer-2 rollups also depend on centralized sequencers. Most L2 networks, including Arbitrum and Optimism, control transaction ordering internally. According to the L2BEAT framework, almost all rollups are still in “Stage 1,” meaning users must trust those sequencers to behave honestly. Finally, while client diversity has improved, Geth remains dominant. Real resilience will come only when no single client exceeds two-thirds of validator usage.

Coordination vs. Autonomy: The Philosophical Divide

The clash over Ethereum governance runs deeper than process. It reflects conflicting worldviews within the ecosystem:

• Technocrats see coordination as essential for progress and safety.
• Radical decentralists view coordination itself as a threat to autonomy.
• Market pragmatists simply want Ethereum to perform and grow, regardless of ideology.

In Ethereum’s “social consensus” model, legitimacy depends on collective agreement rather than code. This principle has guided its evolution since the Merge. But as the network grows more complex, coordination becomes unavoidable. The paradox is clear: to remain functional, Ethereum must organize, and organization inevitably centralizes.

Ethereum vs. Bitcoin and Other Chains

When comparing Ethereum decentralization vs. Bitcoin, the contrast is striking. Bitcoin’s governance is conservative and slow. Upgrades happen only after broad social consensus among miners and node operators. This caution ensures security but limits innovation.

Ethereum moves faster. It evolves through frequent hard forks and agile coordination. That agility, however, demands trust in a handful of developers and researchers. Other networks follow their own paths. Cosmos and Tezos embed on-chain governance models, where token holders vote directly on upgrades. Solana prioritizes performance, accepting a more centralized validator structure. Ethereum sits between them. It’s socially governed, economically modular, and still fighting centralization at the edges.

Path Forward: Can Ethereum Re-Decentralize?

The community is well aware of these contradictions and is taking steps to address them:

1. Enshrined PBS – to eliminate reliance on third-party MEV relays.
2. Decentralized sequencers – rollups like Arbitrum and Optimism are testing multi-operator models.
3. Client diversity incentives – proposed rewards for validators who run minority clients.
4. Funding pluralism – expansion of the Protocol Guild and new independent grant programs.
5. Transparent governance – more structured AllCoreDevs notes and open review periods for upcoming EIPs.

Together, these initiatives aim to spread authority and rebuild confidence in Ethereum’s decentralization narrative. The process is gradual but measurable.

Conclusion

Ethereum remains the beating heart of Web3, despite its governance revealing a complex reality. Ethereum decentralization is not an endpoint; it’s an ongoing negotiation between idealism and practicality. The network’s success depends on coordination, yet coordination concentrates power.

Whether Ethereum evolves into a self-sustaining open commons or settles into a benevolent technocracy will depend on how it manages its own dependencies: in clients, validators, relays, and funding. Its outcome will determine not just Ethereum’s credibility but the future of decentralization itself.