Can’t Escape Aggregation Theory
June 16, 2025
When I first fell down the crypto rabbithole, I thought we'd finally found an escape hatch from gatekeepers. Free from big tech giants, it felt like the natural continuation of the early web: people spinning up crazy projects, weird websites, and forums filled with everyone’s cypherpunk takes.
Fast forward a decade, and we're back to a very familiar place: a handful of choke points own the onramps, the data feeds, and the liquidity pools. This isn't a bug in crypto's design, rather it's the inevitable result of how decentralized systems actually work. The same pattern played out with the internet, and it's playing out again with crypto.
Decentralization Creates the Conditions for Aggregation
Truly decentralized technologies do eliminate gatekeepers at the protocol level. The internet is obviously more decentralized than the printing press: anyone can publish a website without permission from a central authority or significant capital expense. Bitcoin is genuinely more decentralized than traditional banking: anyone can send value without a bank's approval.
In the past, financial markets were inherently local. A trader in Lagos couldn't easily access the same liquidity as someone in London. Banks imposed geographic friction through correspondent banking networks. Regulations created national silos. Capital controls trapped money within borders. This friction actually limited centralization: you had thousands of local exchanges, regional banks, and national payment systems each operating within their own constraints.
Crypto shattered these barriers. Anyone with an internet connection can access the same global liquidity pools, trade the same assets, and interact with the same financial primitives. A farmer in rural India can now swap tokens on the same decentralized exchange as a hedge fund in Manhattan, using the same stablecoins, at the same prices, 24/7.
This is genuine decentralization at the access level. It’s permissionless participation for anyone, anywhere. But removing all that geographic and institutional friction created something unexpected: perfect conditions for unprecedented aggregation. When every participant on Earth can freely choose the best platform, the winners don't just dominate their local market, they dominate the global one.
Ben Thompson's Aggregation Theory explains this beautifully: when user acquisition, supply onboarding, and distribution all trend toward zero cost, whoever controls the user relationship controls the entire value chain. The internet didn't fail to stay decentralized, it succeeded so thoroughly that it enabled new monopolies to emerge at a higher layer. Crypto did the same thing, but for markets.
How the Open Web Got Captured
The internet's evolution follows a now predictable script:
Phase 1: Technical decentralization succeeds. By 1998, anyone could host a website for ~$5/month. No central authority controlled who could publish or what they could say. The protocol-level gatekeepers (telecom monopolies, traditional publishers) were successfully bypassed.
Phase 2: User experience aggregators emerge. With millions of websites live, discovery became the bottleneck. Google's PageRank solved this by creating a single point of entry to the web's chaos. Today Google answers ~89% of global queries—not because they control the protocol, but because they control the user experience.
The pattern repeated across every major internet service:
- Email: SMTP let any server send mail, but Gmail captured the inbox with superior spam filtering backed by massive data advantages
- E-commerce: HTML made storefronts trivial, but Amazon captured checkout with one-click purchasing and logistics networks that individual sellers couldn't match
- Social media: Anyone could build a social network, but Facebook captured the social graph through network effects that made competing platforms irrelevant
In each case, the underlying technology remained decentralized while the user experience consolidated around a few dominant players.
Crypto Is Replaying the Same Script
The crypto pitch was a permissionless financial system with no corporate overlords. The reality is a fresh crop of overlords built on top of the permissionless base layer, each one emerging by providing superior user experience and then capturing demand:
- Stablecoins: Anyone can issue a dollar-backed token, but users gravitate toward the ones with the deepest liquidity and highest reliability. Tether gained early dominance through first-mover advantage and consistent peg maintenance. USDC captured institutional demand with better compliance and transparency. Together they control ~86% of stablecoin supply because when you need to move $100 million quickly, you choose the token with the tightest spreads and deepest order books—not the one with the most decentralized governance.
- Exchanges: Anyone can launch a trading venue, but traders follow liquidity. Binance started by offering lower fees and listing more altcoins than established players. Coinbase captured the regulated U.S. market by being the first major exchange to secure proper licensing and provide institutional-grade compliance. Once they had the deepest order books in their respective markets, every subsequent trader had a rational reason to trade there—better execution, lower slippage, more trading pairs. Together Binance and Coinbase now clear almost 50% of global spot volume because when you're trading, you go where the liquidity is, regardless of ideology.
- Mining Pools: Anyone can mine Bitcoin solo, but miners join pools for predictable payouts. Foundry USA captured ~29% of hashrate by offering better payout terms and lower fees than competitors. Individual miners don't care about decentralization when they have electricity bills to pay—they join whichever pool maximizes their returns.
- Oracles: Anyone can publish price data on-chain, but DeFi protocols integrate with the most reliable feeds. Chainlink secured ~60% of DeFi TVL by providing consistently accurate data with strong uptime guarantees. Protocol developers don't experiment with unproven oracles when billions in TVL depend on accurate prices—they use the one with the best track record.
The pattern is identical to the web: technical decentralization enables anyone to participate, but users aggregate around superior products and network effects. The irony is that crypto's permissionless nature accelerated this concentration—when anyone globally can choose any platform with zero switching costs, the winners don't just dominate their local market, they dominate the entire world.
The Aggregation Layer Always Wins
What we're seeing in crypto isn't a deviation from decentralization, but rather it's the mature form of decentralized systems. The base layer remains permissionless (anyone can still run a Bitcoin node or deploy a smart contract), while the experience layer consolidates around efficiency and convenience.
This is the fundamental insight that crypto advocates miss: decentralization at the protocol level and centralization at the application layer aren't contradictory, they're complementary. The former enables the latter.
The internet is simultaneously the most decentralized communication technology in human history and dominated by a handful of giant platforms. Both things are true, and the second emerges naturally from the first.
Going Global (Again)
Circle didn't invalidate Ben Thompson's Aggregation Theory with their IPO, they extended it from routing packets to routing money. More importantly, they extended it from local markets to global ones. The aggregation layer simply moved from geographically constrained traditional financial institutions to globally accessible crypto native ones.
We traded thousands of local financial intermediaries for a handful of global ones. The old system's friction created natural limits to concentration. The new system's frictionlessness removed those limits entirely.
We now have a financial system that's technically more decentralized than anything that came before it, controlled by a new generation of aggregators who serve a global market rather than regional ones. The concentration isn't just similar to the old system, it's more extreme because the addressable market is the entire world.
The internet has made the world more interconnected and brought so much of the global economy online. Crypto is just the next iteration of the internet globalizing everything.