Bank for international payment compensation explains that real decentralized finances are an illusion -
Bank for international payment compensation explains that real decentralized finances are an illusion -
The Bank for International Payment Compensation (BIZ), a financial organization consisting of several central banks, has declared that the goal of decentralized financing is to shift control over financial instruments from the current financial institutions, but represents only one "illusion". The organization argues that there is a kind of centralization around governance tokens and that this extends to Proof-of-Stake (POS) consensus chains.
Bank for international payment compensation criticizes Raison d’Etre. the decentralized financial world
The Bank for International Payment Compensation (BIZ), a group of central banks, has dealt with the increase in decentralized financing applications and their current impact on the capital markets. The bank has criticized Before and now, in the last quarter edition review , published a report with the title "Defi risks and the decentralization illusion" in which it of the sector questions and explains that there is no real decentralization.
The report states that the current implementation of DEF has little to no influence on giving the mass of financial freedom, since it is an self -contained environment. The report emphasizes:
currently has (Defi) only a few real economy applications and largely supports speculation and arbitrage over several crypto-assets. In view of this independence, the potential for deficit -controlled disorders in the broader financial system and in the real economy seems to be limited for the time being.
Decentralization is an "illusion"
In addition, the biz criticizes the way Defi explains its total decentralization compared to the traditional financial market. The organization argues that this decentralization is only an illusion and that the execution of Defi today also harbors centralization risks.
The report says:
All defi platforms have an element of centralization that usually revolves around "governance token" (often platform developers), which votes on suggestions, similar to company shareholders.
In addition, it suggests that defi protocols are considered legal entities due to this governance element. Since most chains that have decentralized financial protocols are driven by proof-of-stake consensus-salgorithms, this also leads to a kind of centralization in the hands of the big token-Bagholder.
Another interesting source of centralization is the growing connections that the traditional financial world builds up with these new protocols. This could lead to a spillover from traditional finance and bridging companies to DEF, which could significantly impair the operation of this protocols.
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