Ethereum Co-Founder Buterin Warns of Decentralization Risks in Web3

Vitalik Buterin, the co-founder of Ethereum, delivered a stark warning at the Ethereum Community Conference in Cannes. He emphasized that the Web3 industry is at a critical juncture, where the principles of decentralization and privacy are at risk of being compromised by increasing corporate influence and regulatory pressures. Buterin urged developers to embed these principles as default features, rather than optional extras, to prevent the industry from becoming another centralized system.

Buterin highlighted that many projects claiming to be decentralized are actually reliant on centralized components, such as upgrade keys and admin tools. He warned that if a project's functionality ceases when the company behind it disappears, it is not truly decentralized. This issue is particularly relevant as many NFT platforms and bridges have shut down, leaving users stranded from their assets.

To assess the trustworthiness and level of decentralization of a Web3 project, Buterin proposed three concrete tests. The first is the Walk-Away Test, which evaluates whether users can retain access to their funds and functionality if the team behind the protocol goes dark or dissolves. The second is the Insider Attack Test, which assesses the potential for damage from internal threats. The third is the Trusted Computing Base Test, which measures how much code a user must trust to keep their assets safe. Buterin emphasized that a smaller and simpler trusted base leads to better security.

Buterin also stressed the importance of privacy, stating that it should be the default, not a bonus or toggle. He pointed to zero-knowledge (ZK) technologies as a breakthrough but warned that their potential is being squandered if the login process leaks metadata through centralized providers. He advocated for on-chain login systems, local client-side proofs, and fully decentralized identity mechanisms to ensure privacy at every layer.

The growing corporate influence in the crypto world poses a significant danger, according to Buterin. He cautioned against "suitcoiners"—individuals who prioritize regulatory compliance and maximizing profits over decentralization and user empowerment. Buterin warned that once crypto systems start optimizing for corporate onboarding and KYC funnels, they risk becoming indistinguishable from fintech apps, echoing the early internet era where open platforms became gated and surveilled.

Buterin also addressed the pressure to simplify Ethereum’s base layer, calling for minimal, robust systems that reduce reliance on off-chain infrastructure. He proposed shrinking Ethereum’s base layer to eliminate bloat, embedding audit-friendly design principles, ensuring backward compatibility, and using light clients and statelessness to reduce validator hardware requirements. He acknowledged that Ethereum’s evolution has introduced necessary innovations but stressed the need to balance growth with core decentralization principles.

Buterin's call to action was not limited to core developers. He directly addressed wallet developers, dApp creators, and DAO builders, urging them to assess their own systems honestly. He encouraged developers to resist pressure from investors and regulators to add centralized "safety nets" that ultimately compromise user sovereignty. Buterin's message was clear: the future of Ethereum and the Web3 industry depends on the commitment to decentralization, privacy, and user empowerment.