Decentralization Matters - The Daily Gwei #426
Decentralization Matters - The Daily Gwei #426
Putting the "De" back in "DeFi".
Over the last 24-48 hours there has been a lot of controversy and drama surrounding the projects that were being promoted by “Frog Nation” (Abracadabra, Wonderland and Popsicle Finance). I’m sure you’ve all seen by now why - the former co-founder of QuadrigaCX and serial scammer was revealed to be Sifu - the “right-hand man” of Daniele Sesta (leader of the Frog Nation). But this isn’t what I want to focus on today - I want to have a serious discussion about where DeFi is today and where it needs to go.
It’s no secret - governments around the world are going to be looking to regulate DeFi sooner rather than later and many are already trying to do so. What episodes like the Frog Nation drama do is give governments more of an excuse to regulate this industry faster and with more insidious regulations. It’s comparable to governments pushing through laws to restrict people’s freedoms in the name of “protecting the children” or “fighting the terrorists” - they are just using trumped-up boogeymen to sell their shitty policy to the public - and they will do the same with DeFi by saying they must regulate it to “protect investors” or something similar.
Another thing that just exacerbates all of this is that many of the newer DeFi protocols (those being touted as “DeFi 2.0”) are very much DINO - decentralized in name only. Many of them are actually just controlled by a multi-sig or admin key with a vague plan on their roadmap to practice “progressive decentralization”. In Wonderland’s case, Sifu was given full control over a massive 9 figure treasury with really nothing preventing him from stealing all of the funds whenever he wanted to. Of course, people were fine with this as long as the music kept playing (aka people were making money) but then Wonderland started unwinding, Sifu’s real identity came to light and suddenly the music stopped with no chairs left to sit on.
I think the main problem with all of this is that many of these ponzi-esque or get-rich-quick projects aren’t trying to be DeFi nor do they actually want to be. They’re just attaching themselves to the DeFi branding for the added publicity and recognition - the main aim is really just to make money off of the extreme degenerate behavior we tend to see in bull markets. This is incredibly damaging to the real DeFi projects because regulators and non-crypto people are not going to differentiate between real DeFi projects and the pretenders - they will just cast a wide net and throw it all into the same bucket. This has the potential to be very damaging to the prospects of legitimate projects that may not be decentralized yet for various reasons.
Of course, the whole point of real DeFi is to make truly decentralized protocols that quite literally cannot be regulated or shut down by any central party. Unfortunately these protocols are few and far between these days but they do exist and they work very well - we just need to set standards in our ecosystem so that more of these protocols can blossom and thrive.
Decentralization matters - it’s time to stop messing around and start acting like it.
Have a great weekend everyone,
Anthony Sassano
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All information presented above is for educational purposes only and should not be taken as investment advice.