Crypto has a centralization problem

Crypto is full of contradictions, and centralization is one of the biggest. Look no further than Telegram, which, despite its reputation, is just as centralized as the rest. 

Over the weekend, the arrest of Telegram’s CEO Pavel Durov in France brought this paradox into sharp focus. For a company that’s supposed to embody the anarcho-cypherpunk ethos, it’s sure cozy with centralized control.

On a technical level, crypto is supposed to be binary—either you have the private key, or you don’t. No middle ground. But when you look at centralized stablecoins like Tether or USDC, things get weird. 

Tether, for instance, has baked backdoors into its Ethereum and Tron smart contracts, giving its team the power to freeze, destroy, blacklist, and even reverse transactions. 

And Tether uses these powers all the time, often in response to requests from law enforcement or, sometimes, a tweet. Circle, the company behind USDC, doesn’t have quite as many levers, but they can still freeze balances when the authorities come knocking. 

So much for decentralization, right?

Trust in crypto is more fragile than you think

The blockchain itself might be strong and censorship-resistant, but a lot of projects in this space don’t quite meet that gold standard of decentralization. Take the saying “Don’t trust, verify.” It’s a tough mantra to live by, especially in the social layer of crypto. 

When it comes to humans, trust is always a bit wobbly. Multi-signature wallets (multi-sigs), decentralized autonomous organizations (DAOs), foundations, and key-burning ceremonies are all meant to bridge this trust gap. 

But let’s be real—there’s still a huge amount of trust baked into these systems. Look at layer-2 networks like Optimism and Arbitrum.

Users have to trust that the signatories of their multi-sig wallets won’t team up to push some shady contract upgrade that could swipe or mess with user funds. 

We’re talking about $39 billion in user assets hanging in the balance. That’s a big bet on human honesty and competence. And then there’s Telegram. Aligned with the spirit of crypto yet centralized in a way that makes trust unavoidable.

But let’s not pretend encryption is a clear-cut answer here. Does default encryption even matter? For a lot of people, it doesn’t. 

Many Telegram users aren’t even there for encrypted messaging. They’re treating Telegram more like a social network than a private messenger.

Encryption or not, does It matter?

Telegram’s appeal is about features that turn it into a social media hybrid. Take “channels,” for example. These are like public broadcast networks where a single user—or a few—can send messages to millions. 

When you’re shouting out to thousands of strangers, privacy isn’t exactly a top priority. Then there are those huge group chats, where thousands of people can come together, either in public or invite-only settings. In these scenarios, encryption isn’t really a factor because there’s no expectation of privacy.

Now, say you step out of a public group chat to have a more private chat with a few friends. You might think that deserves more security, right? 

But with Telegram, that’s not happening unless you manually enable the “Secret Chat” feature, which is buried under multiple menu layers and isn’t even available if the other person is offline. So much for seamless private messaging.

Then there’s the question of privacy for those who use Telegram for its social aspects. You might just be on Telegram to consume content, not to produce it. 

But the moment someone tries to send you a private message, privacy concerns come back into play. Are you really going to dig through settings to turn on “Secret Chat” just to avoid Telegram’s servers? Probably not.

There’s this idea that Pavel is a champion of free speech, resisting pressure from “the Matrix” or whoever else. But even if Pavel has stood his ground on some issues, the platform itself is far from being a bastion of decentralization. 

For a company with 900 million users and heaps of sensitive data, trust is still the game. And trust is a shaky thing in a world that’s supposed to be built on code, not people.

It’s time to rethink what decentralization means in every layer of this industry. If Telegram’s current setup is anything to go by, we’re a long way from that ideal.