The core failure seems a lot more fundamental than that to me. The only things you can "digitally" possess are digital items. But people don't care about owning blockchain entries. They want to own paintings and houses. Property rights are a legal matter, however. The only way ownership of a blockchain entry can entail ownership of a physical good is if the law says so. And, at least for now, law is centralized. Only the state can make it and only the state can enforce it. If the entity that arbitrates and decides property claims is centralized, whether or not their ledger is also centralized makes no difference.