Is Decentralization Dying?

14 min read3 days ago

I asked somebody, “Why are you building on X blockchain?” He said, “We go where money goes.”

This is what is happening in Web3 right now.

In this piece, I will cover:

Bitcoin Mining Centralization
The Evolution: Crypto Altruism
Case Study: Crusoe Energy’s Divestiture of Bitcoin Mining Unit to NYDIG
Blockchain Trends in 2025
My Take

“If the U.S. doesn’t get its debt under control, if deficits keep ballooning, America risks losing that position to digital assets like Bitcoin.”
— Larry Fink, CEO at BlackRock

With Eric Trump and Donald Trump Jr. investing in a Bitcoin mining company (American Bitcoin, which was formed through the merger of Hut 8 and American Data Centers).

And CoreWeave closing its IPO ($40 per share).

Where are we headed?

American Bitcoin aims to become one of the world’s largest and most efficient Bitcoin miners, targeting over 50 EH/s and fleet efficiency below 15 J/TH. Hut 8, a Bitcoin mining company, is diversifying by investing in AI infrastructure, with plans for a data center campus that could create 1,500 to 2,000 construction jobs and require 300MW of power.

Bitcoin mining has evolved into a landscape dominated by large companies with access to significant capital, physical sites, and low-cost power, driven by profit maximization. This centralization, coupled with the volatility of Bitcoin’s value, has led some companies (like Core Scientific) to pivot to AI for more predictable returns.

While Bitcoin mining companies are transitioning into data centres and providing computing services for AI, Trump’s family is betting on mining.

The top mining pools, such as Foundry (30.69%), Antpool (17.57%), and F2Pool (10.15%) already control over 50% of the global hash rate, with ten pools finding solutions for more than 92% of Bitcoin blocks. This centralization is driven by economies of scale, where larger operations benefit from lower costs and higher efficiency.

Centralization could undermine trust in the network, as a few entities might influence decisions, conflicting with the peer-to-peer, trustless principles of Web3. However, as long as no single entity controls over 50% of the hash rate, the network remains secure, suggesting that multiple large players like American Bitcoin could maintain balance.

Since taking office, Donald Trump has softened regulations on the crypto industry and announced a government Bitcoin stockpile. Now, with his family’s involvement, can regulation be more influenced? We all know the answer.

Bitcoin Mining Centralization

Bitcoin mining involves validating transactions and adding them to the blockchain through proof-of-work, rewarding miners with block subsidies (paid in Bitcoin) and transaction fees. Currently, block subsidies constitute about 90% of returns, with transaction fees making up the remaining 10%, highlighting the dependency on Bitcoin’s value, which is notoriously volatile.

Implications for Bitcoin Network Security and Decentralization

The centralization of Bitcoin mining has dual implications. On one hand, it enhances network security by increasing hash power, crucial for transaction validation. On the other, it risks undermining Bitcoin’s decentralized ethos, a cornerstone of its appeal and a principle shared with Web3. Research suggests that while the network remains secure as long as no single entity controls over 50% of the hash rate, the concentration of power among a few pools could lead to potential security risks, such as a 51% attack, though this has not occurred.

Shift to AI by Mining Companies

Amid these challenges, some Bitcoin mining companies are pivoting to AI for more predictable revenue. This shift is motivated by the stable demand for AI computations, particularly for training machine learning models, which require significant power and infrastructure — resources mining companies already possess. Reports indicate that companies like Core Scientific have announced a 12-year deal with CoreWeave to provide AI hosting, expecting over $3.5B in revenue, with shares jumping 30%. Similarly, Marathon Digital Holdings is exploring AI opportunities while continuing Bitcoin mining.

Analysts expect 20% of Bitcoin miner power capacity to pivot to AI by the end of 2027.

The shift to AI could have several effects on the Bitcoin network:

Reduced Hash Rate: If mining companies reduce Bitcoin mining activities, the network’s hash rate might decrease, potentially affecting security. However, given the diversification strategy, many companies are likely to maintain dual operations, mitigating this risk.
Stabilized Operations: Revenue from AI can help mining companies weather periods of low Bitcoin profitability, ensuring their continued participation in the network. This financial stability could also allow them to invest in other crypto projects, indirectly supporting the ecosystem.

For the broader crypto ecosystem, including Web3, the impact is mixed. On one hand, stable finances could fund innovation in decentralized applications and blockchain technology. On the other, reduced focus on Bitcoin mining might be perceived as a sign of instability, potentially damaging the industry’s reputation. And, Trump is seeing this opportunity.

The Evolution: Crypto Altruism

The operation of blockchain nodes, while technically demanding, remains a cornerstone for network integrity and individual empowerment.

Understanding Blockchain Nodes

At its core, a blockchain network relies on a distributed network of computers, known as nodes, running specialized software to validate and relay transactions and blocks, ensuring the integrity and consensus of the entire system. The motivations for individuals to operate these nodes are diverse, stemming from a desire for greater control and security to contributing to the overall health of the network.

Benefits of Running Blockchain Nodes

Running a full node empowers users to independently verify the state of the blockchain, eliminating the need to trust third parties for this crucial function. This self-verification capability allows users to confirm the total supply of a cryptocurrency and prevent the double spending of their digital assets. By broadcasting and verifying their own transactions through their node, individuals can engage with the blockchain without relying on intermediaries, fostering financial sovereignty.

Beyond individual benefits, running a node significantly contributes to the robustness and security of the blockchain network. Each additional full node provides an extra layer of validation for transactions, making it more difficult for malicious actors to manipulate the network. This distributed validation process, where nodes constantly check transactions and blocks against predefined rules, ensures the network remains resilient against censorship and manipulation.

Challenges and Resource Considerations for Node Operators

Despite the compelling benefits, operating a blockchain node, especially a full node, presents several challenges and demands significant resources. Setting up and maintaining a node often requires a certain level of technical expertise, which can be a barrier to entry for users with limited technical knowledge. Full nodes, which store the entire history of the blockchain to independently verify its state, have substantial resource requirements. This includes significant storage capacity, as blockchains like Bitcoin have grown to hundreds of gigabytes. For instance, Bitcoin Core, a popular Bitcoin client, requires around 200 GB of free disk space for the initial synchronization with the network. Beyond storage, nodes require a stable, high-bandwidth internet connection to communicate with other nodes and propagate transactions and blocks efficiently. Bitcoin Core’s recommended minimum bandwidth usage is 5 GB per day for uploads and 500 MB per day for downloads.

Maintaining a node is an ongoing process that necessitates regular updates, monitoring, and occasional troubleshooting to ensure optimal performance. Node operators must stay informed about network upgrades and adapt to protocol changes to maintain compatibility and security. Security is also a paramount concern, as improperly secured nodes can become targets for malicious attackers seeking to disrupt the network or gain access to sensitive information. Implementing robust security measures, such as firewalls and antivirus software, adds to the complexity and cost of running a node.

The Importance of Decentralization and Network Participation

The principle of decentralization is fundamental to the ethos and security of blockchain technology, and a greater number of full nodes is crucial for achieving this ideal. A decentralized network, where transaction validation and data storage are distributed across numerous independent nodes, is inherently more resistant to censorship and single points of failure. With a widespread distribution of nodes, it becomes significantly more challenging for any single entity or group to control or manipulate the network. Each full node plays an active role in validating transactions and ensuring they adhere to the network’s rules, thereby preventing fraudulent activities and maintaining the integrity of the blockchain. Peter Todd introduced the concept of “economic nodes,” which are run by individuals or entities to validate transactions and safeguard their own cryptocurrency holdings, highlighting the direct link between individual security and network participation.

While full nodes provide the highest level of security and verification, lightweight or Simplified Payment Verification (SPV) clients offer a less resource-intensive way to interact with the network. However, unlike full nodes that download and verify every block and transaction, light nodes only verify whether transactions were included in a block and rely on full nodes for certain data. This reliance underscores the continued importance of a healthy population of full nodes to support the broader network ecosystem. The decentralized nature of node operations ensures that the blockchain remains tamper-proof and that no single authority can unilaterally alter the rules or history of the network.

Institutional Investment in Cryptocurrency Infrastructure

Over the past decade, digital assets have moved from a niche area to a cornerstone of a new financial paradigm, prompting institutions to rethink their approach to investments, efficiency, and innovation. The initial skepticism surrounding digital assets has gradually dissipated as more financial institutions recognize the potential of cryptocurrencies to hedge against inflation, diversify their portfolios, and capitalize on the growing acceptance of this asset class. This shift is not merely a passing trend but rather a strategic response to a changing market landscape, with institutions increasingly viewing cryptocurrencies not only as speculative assets but also as a legitimate component of a balanced investment strategy.

Several companies, such as Coinbase Custody and Anchorage Digital, have emerged to provide secure, compliant custody services tailored to the needs of institutions. These solutions often include features like cold storage, multi-signature wallets, and insurance to protect against potential losses.

There are multiple opportunities to explore: DeFi, Tokenization, NFT and Stablecoins.

Degree of Centralization

The ideal of a completely distributed network, where no single entity has control, faces various pressures that can lead to some degree of centralization. Examining the distribution of nodes across different countries offers one perspective on decentralization.

For Bitcoin, statistics show a significant number of reachable nodes are located in the United States and Germany, although a large percentage of nodes are often categorized as “n/a” due to the use of privacy-preserving technologies like Tor. Similarly, Ethereum node distribution also shows a concentration in countries like the United States and Germany.

The trend of node consolidation, where the number of active nodes might decrease over time, is another aspect of centralization to consider. For example, some data suggests that the number of full Bitcoin nodes dropped significantly between 2014 and 2016. The resource requirements for running full nodes can contribute to this consolidation, as individuals with limited resources might be priced out of participating directly. In Proof-of-Stake networks like Ethereum, the rise of staking pools, where multiple users pool their assets to participate in staking, can also lead to a form of centralization, as a few large pools might control a significant portion of the network’s staking power.

Potential Impacts on Web3 and Crypto

The transition from Bitcoin mining to AI applications could significantly shape the future of Web3 and the crypto ecosystem. Below are the key implications:

1. Further Centralization

As smaller miners exit the market due to unprofitability, mining power could become even more concentrated among large players with the capital and infrastructure to persist. This trend exacerbates existing centralization concerns:

Impact on Bitcoin: A more centralized hash rate increases the risk of 51% attacks and reduces the network’s resilience.
Impact on Web3: Web3’s decentralized ethos — built on trustless, peer-to-peer systems — could be undermined if foundational blockchains like Bitcoin become dominated by a few entities.

2. Intersection of AI and Blockchain

Companies with expertise in compute-intensive tasks and blockchain technology could pioneer innovative applications that integrate AI and decentralized networks. Potential developments include:

Decentralized AI Marketplaces: Platforms where AI models are trained and shared on blockchain networks, ensuring transparency and incentivizing participation.
AI-Powered Smart Contracts: Contracts that use machine learning to adapt to real-time data, enhancing functionality.
Blockchain Optimization: AI could improve consensus mechanisms (e.g., predicting network congestion) or enhance security by detecting fraudulent activities.

This synergy could drive a new wave of Web3 applications, blending AI’s predictive capabilities with blockchain’s immutability.

3. Resource Diversion

If companies prioritize AI’s predictable profits over blockchain’s speculative returns, they may allocate fewer resources to Web3 development. This could:

Slow Innovation: Reduced investment in decentralized applications (dApps) and infrastructure might hinder Web3’s growth
Shift Focus: Mining companies could become compute providers rather than blockchain advocates, diluting their role in the crypto ecosystem.

4. Compute Power Commoditization

The shift highlights the fungibility of compute resources, where data centers can serve multiple purposes — mining, AI, or other high-performance computing tasks. While this flexibility could lead to more efficient resource use, it also risks:

Power Concentration: A few large compute providers could dominate both AI and blockchain sectors, mirroring centralization trends in Big Tech.
Market Dynamics: Compute power could become a commodity traded across industries, potentially distancing it from Web3’s decentralized mission.

Case Study: Crusoe Energy’s Divestiture of Bitcoin Mining Unit to NYDIG

Transaction Overview

On March 25, 2025, Crusoe Energy announced the sale of its Bitcoin mining unit to NYDIG, marking a strategic pivot from cryptocurrency mining to artificial intelligence (AI) infrastructure. This transaction includes Crusoe’s 425 modular data centers and its innovative digital flare mitigation technology, alongside a $225 million debt raise to fund AI-focused initiatives.

Company Profiles

Target: Crusoe Energy (Crypto Mining Unit)

Founded: 2018
Headquarters: Denver, CO
Business: Operates mobile modular data centers that convert flare gas — a byproduct of oil production — into electricity for crypto mining and AI workloads.
Crypto Mining Unit:
425 modular data centers across the U.S. and Argentina.
270 MW of power capacity.
Digital flare mitigation technology, reducing 2.7M metric tons of greenhouse gas (GHG) emissions and preventing 22B cubic feet of gas flaring (equivalent to emissions from 630,000 cars annually).
Employees: 550 total, with 135 in the crypto mining unit transferring to NYDIG.
Funding: Raised $1.6B previously, valued at $2.8B post-money. Key investors include Bain Capital Ventures, Valor Equity Partners, and Founders Fund.

Buyer: NYDIG

Founded: 2017
Headquarters: New York, NY
Business:

Bitcoin mining with extensive ASIC miner deployments.
Digital asset services, including custody, trading, and Bitcoin-collateralized loans.

Recent Moves: Acquired stakes in Coinmint and parts of Greenidge Generation’s operations.
Backing: Affiliate of Stone Ridge Holdings Group, with access to 10GW of U.S. natural gas production.
Valuation: $7B after a $1B round in December 2021, led by WestCap.

Transaction Details

Assets Sold:
425 modular data centers.
Digital flare mitigation technology.
135 employees.
Funding Pivot: Crusoe raised $225M in debt to acquire NVIDIA GPUs and build an AI cloud infrastructure.
Context: Follows a trend of notable crypto mining deals, such as Stronghold Digital to Bitfarms ($175M) and Griid to Cleanspark ($155M).

Strategic Rationale

Crusoe Energy

Shift to AI: AI is poised to consume over 8% of global electricity by 2030, offering a high-growth, stable revenue opportunity compared to Bitcoin mining’s volatility.
Mining Challenges: Increased competition and centralization in Bitcoin mining favor large operators with cheap energy and capital, pressuring mid-sized firms like Crusoe.
Sustainability Evolution: While selling its flare gas tech, Crusoe’s next AI data center (due 2026) will use wind, solar, and natural gas, reinforcing its green energy focus.

NYDIG

Enhanced Mining Scale: The acquisition boosts NYDIG’s mining capacity and efficiency with Crusoe’s assets.
Energy Advantage: Leveraging Stone Ridge’s 10GW natural gas reserves, NYDIG can power operations at lower costs using flare gas technology.
Consolidation Strategy: Aligns with NYDIG’s pattern of acquiring mining operations to expand its Bitcoin footprint.

Market Implications

Bitcoin Mining Trends: The deal reflects consolidation in the sector, where scale and cost efficiency dominate, potentially increasing centralization risks for Bitcoin’s network.
AI as a Pivot: Companies are rethinking data center use, with AI offering predictable demand versus crypto’s price-driven volatility.

It could spark advancements at the AI-blockchain nexus, like decentralized AI networks.

Is mining the best use of data center resources? It demands low-cost energy and capital, but revenue tied to Bitcoin’s price (90% from block subsidies) introduces uncertainty, akin to commodity markets.

Repurposing for AI pits Crusoe against hyperscalers (e.g., Google, Amazon), requiring differentiation — possibly via sustainable energy expertise.

A bigger question is: Are people still participating altruistically in the blockchain space?

Global interest in blockchain has also plummeted by 63% over the past three years.

Developer activity across chains has declined in 2025.

What can be the possible reason? Drop in incentive programs or AI hype.

I will go with the AI hype. As the AI buzz spreads, VCs are also funding mainly AI and infrastructure companies, and hence, incentive programs are not as they used to be in 2021.

Blockchain trends in 2025:

Decentralized Physical Infrastructure Networks (DePINs) are emerging as a transformative force within the Web3 ecosystem, decentralizing the ownership and operation of physical infrastructure.
By converting tangible assets like real estate, commodities, and art into digital tokens on a blockchain, tokenization aims to unlock liquidity and enable fractional ownership, thereby democratizing access to traditionally illiquid markets.
The convergence of Artificial Intelligence (AI) and cryptocurrency is creating intelligent, decentralized systems capable of optimizing various processes and enabling new applications.
Memecoins, while often viewed as speculative assets, continue to capture significant interest within the cryptocurrency space and have proven to be powerful drivers of liquidity.

Trump’s involvement could lead to the establishment of clearer legal frameworks, reducing uncertainty and encouraging businesses and developers to invest in and build upon Web3 technologies.

But: How will space react to it? This is very important. Builders and the community have created a big bubble. Even though the past 12 months have seen great progress towards real-world utilization of the technology, the developer and protocol community cannot move past it. What are we seeing? More L2 and more DeFi protocols with an addition of memecoins.

Also: The pivot from Bitcoin mining to AI applications reflects a broader trend: the commoditization of compute power. Companies are increasingly viewing their data centers as versatile assets deployable across compute-intensive tasks, from cryptocurrency mining to AI model training.

The future hinges on how these companies balance profitability with decentralization. Prioritizing short-term AI gains over long-term blockchain innovation could stall Web3’s progress. Honestly, that’s what we are chasing right now.

However, if they leverage their infrastructure to advance decentralized technologies, the shift could accelerate Web3 adoption.

I will leave you all with one important question: If decentralization is the only focus, what stops big companies from building better, faster, and replacing these projects? They have the money and the execution power.

Instead of chasing short-term metrics like TVL, projects should think ahead — like MoonPay did — focusing on real impact and long-term value. But there’s also the VC effect, where funding pressures push teams toward quick wins over meaningful progress.

Right now, the system feels broken. Too many projects win hackathons but lack a real vision. Builders need to be smarter — shaping projects for the future, not just for short-term hype.

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