The Truth About “Decentralized” Projects: How Decentralized Are They Really?

Not all “decentralized” projects are what they claim to be. Let’s unpack what decentralization really means — and how to spot red flags.

In crypto, “decentralized” is one of the most overused buzzwords.

Projects slap the term on everything from DeFi protocols to DAOs to NFT marketplaces.

But how many of these platforms are truly decentralized — in governance, infrastructure, and ownership?

Let’s break down what decentralization should look like, and where many projects fall short.

Understand the Concept of Decentralization

What Does “Decentralized” Really Mean?

At its core, decentralization means no single entity has unilateral control.

It’s about distributing power — whether that’s over code, assets, governance, or infrastructure.

Real decentralization typically includes:

• Distributed node infrastructure: No central server or cloud dependency

  
  

• Open-source codebases: Anyone can audit, fork, or contribute

  
  

• Onchain governance: Community votes on upgrades and decisions

  
  

• Permissionless access: No gatekeepers — anyone can use or build on it

  
  

• Token distribution: Ownership isn’t concentrated in a small group

  
  

If these elements are missing, you may be dealing with a “decentralized-in-name-only” (DINO) project.

Where Projects Fake Decentralization

Many so-called decentralized projects still rely on:

1. Centralized Frontends

Even if the protocol is onchain, the user interface (UI) often runs on centralized servers. If taken down or censored, access can be cut off.

2. Multisig Governance

Many DAOs are controlled by a 3-of-5 or 5-of-9 multisig — usually held by insiders or founders. That’s not true community governance.

3. Token Concentration

Founders, VCs, or a small group often hold the majority of tokens, giving them disproportionate influence over votes and proposals.

4. Offchain Decision-Making

Critical changes are discussed and decided in private Discords or team meetings — then “rubber-stamped” by a DAO vote.

Why Decentralization Still Matters

Even if full decentralization is hard to achieve, the goal is important for several reasons:

• Censorship resistance: No one should be able to shut down or control the network

  
  

• Security: A distributed system is harder to attack

  
  

• Trust minimization: You don’t need to trust a company or individual

  
  

• Longevity: Decentralized protocols can survive beyond any single team

  
  

Decentralization isn’t binary — it’s a spectrum. But where a project falls on that spectrum should be transparent, not misleading.

How to Evaluate a Project’s True Decentralization

Ask these questions:

• Who runs the nodes or validators?

  
  

• Is the code open-source and actively maintained by multiple contributors?

  
  

• How are governance decisions made — and by whom?

  
  

• Is the protocol usable without relying on centralized infrastructure (e.g., IPFS vs AWS)?

  
  

• What percentage of tokens are held by insiders, founders, or early investors?

  
  

If the answers are vague or guarded, that’s a red flag.

Centralized vs Decentralized Crypto

Final Thoughts

Decentralization is one of crypto’s founding ideals — but also one of its most abused marketing terms.

As users and builders, we need to look past the buzzwords and evaluate decentralization in practice, not just in pitch decks.

True decentralization isn’t easy.

But it's what separates Web3 from Web2 with tokens.

Demand better — and reward the projects that are doing it right.