Author: s4mmy
Translation: TechFlow
The recently launched Tempo project by Stripe and Paradigm has once again sparked discussions about the true importance of decentralization. At the same time, decentralized AI (DeAI) has also been affected, as the value proposition of DAOs (Decentralized Autonomous Organizations) is being questioned in comparison to centralized alternatives like OpenAI.
This article challenges the view that "centralization will dominate" and demonstrates the advantages of decentralization through several successful crypto products.
Contents
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Preface
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Understanding Trade-offs
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Advantages of Decentralization
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Sustainable Ecosystems and Speculation
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The Future of Hybrid Models
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Preface
First, it should be pointed out that decentralization (in its current form) does face some real-world challenges:
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Scalability limitations
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Governance complexity
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User experience barriers
However, adopting strategic decentralization in critical infrastructure can provide better long-term outcomes for innovation, resilience, and the development of autonomous AI agents.
The path forward requires a hybrid model that combines the advantages of decentralization with certain centralized features to enhance the performance of crypto products.
The pendulum between distributed and centralized systems will continue to swing in search of balance; so, what is the optimal level of distribution?
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Understanding Trade-offs
Decentralization is not a panacea.
The blockchain trilemma (the trade-off between decentralization, security, and scalability) forces us to make compromises. For example,
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Bitcoin processes 7 transactions per second (TPS), while Visa can reach 65,000 TPS, clearly demonstrating this limitation.
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Early DAO governance faced issues of collaboration paralysis and token concentration in the hands of wealthy holders.
However, these are engineering challenges, not fundamental flaws.
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After Ethereum switched to Proof-of-Stake, energy consumption dropped by 99.95% while still maintaining security:
Source: SURF Co-Pilot
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Layer-2 solutions inherit Ethereum's decentralization while achieving thousands of TPS.
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AI agents can provide decision-making efficiency, which can be introduced into DAOs to optimize human shortcomings.
Therefore, it is understandable that cypherpunk advocates question Tempo's choice of an alternative Layer-1 solution:
Original tweet link: click here
But @matthuang also clearly stated that the Ethereum ecosystem (including Layer-2) is not developing fast enough to meet the upcoming on-chain payment boom. Therefore, it is necessary to build @tempo independently.
"From an operational perspective, we felt compelled to build for the upcoming demand and reduce dependencies, including reliance on the pace of Ethereum L1 progress."
This sluggishness is indeed an issue, but it does not diminish the areas where decentralization can excel. Both can be true at the same time.
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Advantages of Decentralization
a) Censorship Resistance
In an era where centralized platforms can "ban" users or restrict content due to political pressure, decentralized systems provide an unstoppable space for innovation.
Of course, there are downsides, so finding the right balance is crucial. But this is more a matter of human nature than a technical flaw.
For example, AI development on networks based on Bittensor cannot be shut down by any single authority, thus supporting research in sensitive but important areas.
b) System Resilience
In 2023, USDC depegged due to the collapse of Silicon Valley Bank, demonstrating how centralized systems can create single points of failure risk.
Original tweet link: click here
Decentralized alternatives like Ethena's USDe use delta-neutral strategies across multiple venues, reducing counterparty risk.
c) Democratic Access to Resources
Centralized cloud service providers have formed oligopolies over critical AI infrastructure.
Networks like @Rendernetwork break the monopoly of big tech companies on AI development resources by providing computing power at competitive prices through thousands of nodes.
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Speculation in Sustainable Ecosystems
Yes, there are always deserters in the trenches, as the instinct for gambling is satisfied by betting on the next "sure thing."
However, today's market maturity has led to more focus on fundamentals, especially among institutional investors, who prefer to rely on what they do best—revenue.
Original tweet link: click here
Although the intersection of AI and crypto has generated a lot of market hype, true decentralization drives sustainable ecosystems based on real utility, not just speculation.
I agree that many projects profit from the AI boom without providing functional value:
Original tweet link: click here
But as with any new field, many illusory and valueless things will eventually be replaced by real value.
For example:
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Fetch.ai has built a network of autonomous AI agents to execute tasks
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Ocean Protocol has created a marketplace for secure data sharing, which is key for AI training
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Bittensor has established a competitive arena for AI models
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@Caesar_data , @openservai and @Surf_copilot provide domain-specific fine-tuned models that outperform centralized general-purpose alternatives.
In these systems, tokens are not just speculative assets, but are used as tools for accessing services, incentivizing contributions, and governing the network, thus creating a robust, self-sustaining economy that goes beyond short-term market trends.
Assuming the tokenomics of these projects can be optimized and value returned to token holders, you can refer to the following specific examples of crypto AI product revenue:
Original tweet link: click here
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The Future of Hybrid Models
So, what is the optimal balance point?
The pure cypherpunk vision is becoming increasingly challenging, especially as traditional systems begin to adopt crypto rails.
Original tweet link: click here
But there is certainly a view that the best outcome should lean more towards distributed systems rather than being controlled by a single entity.
The optimal approach is not full decentralization, but rather strategically achieving decentralization in the most important areas.
Critical infrastructure benefits from a more distributed state:
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Financial rails
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AI training networks
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Data marketplaces
User-facing applications, on the other hand, can remain somewhat centralized to optimize user experience (UX).
This is exactly where AI agents shine—completely transforming crypto's poor UI/UX through more widely accepted, user-friendly systems.
This is also why I strongly support the intersection of crypto and AI.
AI is empowered by crypto's permissionless rails, while crypto is brought to the masses through AI products.
Conclusion
Decentralization does face real-world challenges, but with better technology and governance design, these problems can be solved.
The core issue is not whether to fully decentralize, but in which areas decentralization provides irreplaceable advantages: in those foundational layers that drive innovation, resist censorship, and fairly distribute value.
The future belongs to hybrid systems—they strategically achieve decentralization in critical infrastructure while optimizing user experience through centralized interfaces. This balanced approach captures the transformative potential of decentralization while pragmatically addressing its limitations.
As for Tempo, will it repeat the fate of Libra, or will it become a " @Paradigm " (pun intended) opportunity for traditional systems to change their perception of crypto rails? Time will tell.
