Blockchain space has this often confusion, that decentralization should always go besides anarchy and lack of rules. This is not right, and institutional trust has actually a lot to gain from true distribution.
In this article, I will discuss the importance of a decentralized design in institutional and conventional financial systems.
TL;DR Decentralization is a tool for institutions, and its adoption is already speeding up with regulations and certifications over validators.
What does decentralization actually mean for institutions?
In my many articles before, I have given various definitions to decentralization. Although the word has the same meaning in the essence, its capture actually differs fundamentally on use case.
For institutions, decentralization is the distribution of trust. Instead of trusting a single company, real decentralization allows institutions to distribute their trust over various entities, i.e., validators of the network.
Let us consider an example: In a normal financial exchange, the entire flow is controlled by a single company, which is bounded by the laws and regulations of a single country. Although this may seem like an advantage at first, this is actually a less superior design to a distributed network. When you take a financial blockchain, like Ethereum, you get distributed trust over validators of the network.
Validators do not represent a single entity. Each has its own regulations, company, and funding. One validator shutting down does not mean anything for the network as long as the majority of the consensus stays intact.
This has two important advantages.
First, this increases security and hardness. Conventional companies can be shut down overnight, and all of us have seen or heard of giant infrastructure companies breaking in an instance. When you are a financial system, trusting on a single hardware provider is a giant risk, and no bank or fund is actually secure enough for you to trust with your entire money. Blockchains are not bound to a single entity, and its security is not in the hands of a single DevOps team.
Second, the liveness is much higher with distributed systems. You have probably seen the tweet that Ethereum had zero downtime in the past 10 years, while all infrastructure companies, including the biggest ones like Meta or AWS, have suffered from temporary shortages. This is not an implementation problem, but a core architectural advantage that a properly decentralized network cannot be taken down by the failure of a single operator.
Thus, a true decentralized system is not banks and others trying to escape, but actually to use.
But do institutions actually realize this?
We can talk about an ideal world here all day long, but the important question is if others actually know about it.
Luckily yes, and this is the reason why the institutional adoption of blockchain is so rapidly increasing in the past two years despite all of its inconveniences.
It is not a secret that blockchains are not ready: There are still many technical problems, and their UX is still way worse than any “normal” system can offer. Yet, we see that with laws and regulations, all countries adopt the existing blockchains to their systems.
The real reason behind this is technological advantage. From Swift to J.P. Morgan, major financial institutions are no longer treating blockchain as an experiment. They are building their own infrastructure, launching tokenization platforms, and integrating blockchain-based settlement into conventional financial systems.
Stablecoins are another strong example. With the GENIUS Act, the United States gave dollar-backed stablecoins a much clearer institutional framework. The important point is not that the U.S. suddenly created a digital dollar, but that regulation helped legitimize a form of digital dollar infrastructure that was already global. By embracing the technology instead of rejecting it, the U.S. strengthened the dollar’s role in an increasingly digital financial system.
And the tech is enough on its own?
This is another common mistake. Just because blockchain technology is great on its core, it does not mean that institutions will accept it as it is.
Blockchain companies, but in particular validators and RPC providers, need to actually satisfy the asks of regulations. This has an extensive coverage, from certification like ISO/IEC 27001 to locally managed servers, validator companies have a lot of rules to satisfy if they want to be a part of this new, decentralized institutional world.
It is again very important to not confuse decentralization with lack of certification: A validator being regulated or audited does not make them less decentralized, but instead actually proves how secure and strong they are in their services.
This is also our main motivation with node101, keeping the values and power of decentralization while being a pioneer in the certification of validators. Being blockchain native, it is no excuse to postpone the hard process required to be regulation-compliant.
The big takeaway
Today, it is not possible to claim blockchain is just useless. It is one of the biggest technological advancements that we have had in finances and many other areas in decades, and it will be used. Not because we push it hard, but because it is better.
This being said, we should not mistake great technology with great experience. What blockchain is lacking today is not mainly speed or adoption, but order. Law, regulations and certificates are just part of the bigger picture of how blockchain will be integrated into the world of the future.