basement - partial waterproofing?

This novice would be grateful for any tips you may be able to provide.
We live in Minneapolis and have a 1916 two story home with a basement that, to my inexperienced eye, is either poured concrete or cinder block. Much of it is obscured by two thick layers of waterproofing paint (one white, one blue). That paint is the problem.
In some areas, the paint is very much intact. In other areas, however, it is bubbling and flaking off. This activity seems to be occuring along the two walls that don't have porches above them to divert the external water. Worse, in some of the areas where the paint has flaked off entirely, we can see that the concrete underneath has become very crumbly and will fall apart with even a fingerpoke, resembling light brown sand or dirt.
Despite all of this, I'm very happy to report that we've only had water in the basement on two or three occasions in seven years (after 100-year storms). The rest of the time, the basement is just a little damp, which we address with a dehumidifier. Our major issue with the basement is not that it is wet. It is that the perpetual flaking of paint and small pieces of concrete make it a nasty, dusty, grimy place.
My questions: (1) Does the crumbly concrete suggest that a major structural issue with the walls is brewing?
(2) Assuming we don't have a major structural issue, how do I stop the flaking and crumbling? Do I have to strip the entire wall of all the old waterproofing paint, even the stuff that looks pretty good, and then apply some new stuff? Or can I just patch the crumbly spots with quick-setting concrete and paint over it with Drylock or some similar product, leaving the intact painted areas alone?
Thanks in advance for your ideas.
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If the concrete is really crumbly then there is a problem. My guess it there is no problem, but someone who knows foundations would need to inspect it, to make sure.
I suspect the problem is that some moisture is coming through, the "paint" was a bad idea and only increased the problem. Along with the moisture comes minerals that are left behind when the water evaporates.

It would depend on exactly what is happening. From the sound of it, I would guess some sand blasting may be in order to clean things up. The whole thing would be a lot easier if the "paint" had not been used. An acid could be used to clean the mineral deposits off, but with "paint" added to them mix, that has to be removed to get to solid material.
Again, not knowing what you really have, all my suggestions are just guess work. It is very possible that a hundred year old home could be on a foundation that is past it's design life and time for some serious and expensive work. Even so it may not be as bad as you might think. Best of luck

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Joseph E. Meehan

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