Until taking part in a decentralized system is a crime by itself due to potentially illegal content and your possession and distribution of that content.
The distributed system does not stop to work then, but the user might risk punishment for using it, which might be even worse than not being able to use it.
I've been thinking about running a Mastodon server so I'm in control of my social media, but I'm worried about letting anyone use it because of the GDPR.
When decentralized systems are illegal, only criminals will use them. Anonymously. And very likely, using your devices as botnet slaves. But pretty much, you get what you select for.
It will also drop the userbase below a useful threshold. Sure, there will be the technical possibility of still managing to use it illegally and undetected--but there will be no herd immunity, there will be no effects of scale that make the system particularly useful or affordable compared to proprietary, centralized, and more performant alternatives. People can and do still use bittorrent illegally, but it doesn't have even close to enough market share to make centralized streaming services nonexistent or non-competitive. Basically the same idea.
The fact that you can't decentralize legislation and physical governance is not insignificant. You can't block the influence of preexisting powerful actors. Those factors do have the power to destroy the decentralization movement, and most likely will.
Some of us don't particularly want the "herd". The Internet was a better place before Eternal September. And it arguably would have become a far better place, without commercialization.
Maybe those "powerful actors" could prevent decentralization from becoming mainstream, but they can't kill it. Consider marijuana, for example. Use has been demonized for decades by the US and its allies. But that didn't stop an appreciable fraction of the US population from using (or at least, trying). And now it's becoming legal in more and more states.
For Internet decentralization, the driving factors will almost certainly be porn, gambling and prostitution. To the extent that they're driven off the clearnet, demand for them will fuel growth of alternatives. Freedom of expression is essential, of course, but it will be just a side benefit.
The more decentralization is suppressed by "powerful actors", the more it will be dominated by other "powerful actors". That is, by organized crime.
The distributed system does not stop to work then, but the user might risk punishment for using it, which might be even worse than not being able to use it.