A DeFi ecosystem promises to run independently on blockchain without the intervention of centralized institutions. By Running code and smart contracts on blockchain platforms huge sums of value can be processed on DeFi.
Nevertheless, according to Charlie Lee, the creator of Litecoin [LTC],
Most DeFi can be shut down by a centralized party, so it’s just decentralization theatre. And yet no one can undo a hack or exploit unless we add more centralization.
The idea of decentralization of money and the financial system are two entirely different concepts. Bitcoin [BTC] and other payment currencies were built with the aim to transact via a secure medium of contact supply.
Post Ethereums‘ outbreak in 2014, the idea of decentralized money has grown to revolutionize the entire financial system.
Moreover, the smart contract platforms in the last 5-6 years are now looking to transform the way traditional finance works,; the leading component of which is credit and borrowing.
Is Decentralization of Finance of Feasible?
Cryptocurrencies run on the idea of decentralization and security achieved though distributed consensus. The nodes, stakeholders, or miners run on Proof of Work (PoW) or Proof of Stake (PoS) which fuels the system.
DeFi aims to use this property to develop a financing system of lending, exchange, payments and more. Moreover, implementation of such a large vision usually takes time and effort. Most contributors and investors to the DeFi ecosystem have high hopes. However, Lee is still unsure, he notes,
I don’t think it will work in practice. Truly decentralized finance, that is. Complexity will always lead to bugs and exploits. And it will always be semi centralized.
Bitcoin and other some of the other payment focused cryptocurrencies were born with the idea of decentralized money. Some of the other added features that these cryptocurrencies are experimenting with are privacy and ease of access.
According to Lee, stretching the idea to DeFi introduces so many complexity and players into the mix that it can never achieve true decentralization. Hence, will continue to rely on Institutions like we do now.
Do you agree with Charlie Lee or envision Decentralized Finance run on DeFi? Please share your views with us.
from Coingape https://coingape.com/litecoin-creator-doesnt-believe-in-the-idea-of-defi-heres-why/
0 Comments