However, if DeFi is not making this claim, which it (and its underlying technology) is not, then that leaves a pretty big elephant in the room — one that Decentr is dealing with as we develop our radically-new decentralised tech (platform + browser): if a so called “DeFi” Dapp is not 100% decentralised then it leaves itself open to many of the third-party faults, failings and vulnerabilities of centralised finance — only without any recourse to a centralised authority or governance to rectify oversights.
DeFi, a peer-to-peer financial paradigm, which leverages blockchain-based smart contracts to ensure its integrity and security, and contains over USD $1.6Bn of capital as of June 2020. Yet as this ecosystem develops, with protocols intertwining and the complexity of financial products increasing, it is at risk of the very sort of financial meltdown it is supposed to be preventing — largely due to the fact it is not based on 100% decentralised protocols or tokenomics models that are sustainable mid to long-term.
Moreover, design weaknesses in DeFi protocols could lead to a DeFi crisis.
For example, over collateralised DeFi protocols are vulnerable to exogenous price shocks. We have quantified the robustness of DeFi lending protocols in the presence of significant falls in the value of the assets these protocols are based on, showing for a range of parameters the speed at which a DeFi protocol would become under collateralised — again, under collateralisation being a default concern of centralised protocols.
DeFi Dapps, of course, are not the only blockchain based applications that struggle to maintain the integrity of their lofty, decentralised goals when building on foundational tech that is, to a greater or lesser degree, centralised. It is simply that it is when discussing DeFi applications in particular that the degree to which it is remiss to slap the term “decentralised” on any tech that is shoehorned onto a blockchain application becomes most pronounced: i.e., the accusation can be made that it is pedantic to quibble over the “real” semantic and lexicological scope of the word “decentralised” when referring to many of the vague, ill-defined and unworkable applications being built on blockchain.
However, this cannot be said of finance as finance requires the terminology and tech that underpins it to be more robust to deliver very specific and precise outcomes.
With that in mind, to make sure we are using the same definition of “decentralised” (because it does matter at an important level above mere semantics) the Cambridge dictionary defines the word as meaning:
“To move the control of an organisation or government from a single place to several smaller ones.”
Therefore, when we at Decentr refer to “100% decentralisation”, this means the 100% removal of control from larger organisations to ever smaller organisations, which thus infers the process is only complete when the control rests at the level of the smallest entity in these organisations, and that, of course,in the wider decosystem is the individuals comprising it.
The issue with DeFi (like any “decentralised” tech really) is this: you can’t have it every which way: DeFi is either a) minus any intermediary with something robust in its place that wholly does the job of this intermediary (and blockchain is not really up to the task), b) it is minus an intermediary with nothing in its place and it is unregulated anarchy or c) it is not really decentralised but a little bit “less centralised” than existing centralised applications (which is actually the definition of, er, “centralised”), and ripe for third-party interference and exploitation (as human nature will always dictate).
Current DeFi Dapps are, due to the flaws in the underlying tech, essentially, caught between “b” and “c” and is hence a precarious and unsustainable solution (in its present form) for wide-scale public adoption and enterprise level financial transactions, which is why it isn’t realising its enormous potential, either with the broader public, business or industry.
This lack of 100% decentralisation runs deeper in the context of defining a “true” Web 3.0 on which DeFi might be built and be sustainable in the mid to long-term.
Again it is a question of workable definitions leading to workable technology paradigms: the definition of Web 3.0, like DeFi, is vague and ill-defined: that’s fine: it, like DeFi, is a nascent set of technologies that needs time to mature: in general, Web 3.0 is considered to be a Web whereby “context over keywords” will be key in delivering better, more targeted information (in the same way that improved Web browsers, windows and search engines saw the shift from Web 1.0 as in “information dump” to a more contextualised resource).
The slow uptake of any real and dramatic Web 3.0 technology solutions is, in our view, because it is a distinctly uphill battle on an ever steepening incline to “contextualise” the current web: the laws of entropy simply do not allow for the race towards fractured and unstructured data that can somehow, in some undefined manner employing some undefined mechanism, move towards becoming structured without urgent and major intervention.
This intervention needs to be in the form of a set of truly decentralised web protocols whereby decentralised dataflow plus data storage by default begins to turn the tide in the direction of structured and refined, not unstructured and unrefined data.
Once that system is developed, then the foundational tech for a true Web 3.0 is in place; a Web 3.0 whereby not only human beings but autonomous artificial agents can begin to infer meaning from structured data and rapidly continue to refine and structure this data. (As the current net stands, any form of AI agent has cannot effectively distinguish “signals” from “noise”)
Solve that, then you have the basis for “true” DeFi because the robustness of the foundation tech and the immutability of the contextualised data — including financial data and the activity it describes — is a standardised, immutable, predictable and predictive. This is the tech we are building.
The solution as to how to build this tech is relatively straightforward (at least conceptually): to create a “true” Web 3.0 that can support true “DeFi” Dapps requires the creation of 100% decentralised Web 3.0 protocols — the definition of this being a platform that combines decentralised data storage with decentralised data flow (which is the platform + browser we are building).
A true decentralised Web 3.0 by definition replaces centralised institutions with a decentralised network of individual-users-as-nodes, each controlling the internet (and hence their finances and the collective financial assets and models that support the platform) at the level of the individual.
100% decentralisation gives this network 100% immutability and trustlessness based on the collective trust of community consensus as determined by applied cooperative game theory: in effect, true DeFi is the pure and untainted expression of market forces as driven and modulated by collective socioeconomic activity, determined at the level of individuals in this collective — minus the ability for third-party intervention, intentional or corollary, of any kind at any level.
In short, what needs to be borne in mind is that 100% decentralisation is not the diminishment of control to a shadow melee of faceless third-parties on an impenetrable matrix over which we all as users have no control — that is simply bad tech, and the stuff of soundbites that ignorant crypto haters, such as Paul Krugman, Nobel laureate Joseph Stiglitz et al, like to put out there to try and confuse the masses into accepting that the fragile and ultimately failed experiment of mainstream economics is the only alternative that can exist — as though it is somehow an immutable law of the universe.
100% decentralisation is the ultimate expression of DeFi’s aim to deliver user-centric financial services: Decentr achieves this by delivering foundational control of Web 3.0 into hands of every user so that the net functions for every user in precisely the way that every individual user needs and wants, when and how they want it, from the perspective of the targeted retrieval and contextualisation of relevant information. This information includes contextualised financial information, payments and trades as central to its outcome due to the fact 100% decentralisation repurposes 100% secure value itself as a payable and tradeable currency: a “perfect” circular economy.
We look forward to answering all your questions. Please find our official links below.
Official Links for Decentr:
Official Email Address: Admin@decentr.net
Official Website Link: https://decentr.net/
Official Telegram Discussion Group: https://t.me/DecentrNet
Official Telegram Announcements Channel: https://t.me/DecentrAnnoucements
Official Twitter: https://twitter.com/DecentrNet
Official Medium: https://medium.com/@DecentrNet