Cryptocurrency case gives dreams of decentralized finances a sharp kick

crypto networks that have undertaken to give users to control themselves have given themselves the responsibility while trying to survive the tightening crisis that covers the market for digital assets.

In the past week, three decentralized financial groups have intervened with emergency plans to protect their projects and users from economic problems in the face of falling cryptocurrency prices.

The three platforms - Maker Dao, Bancor and Solend - are not known names. But they are prominently in the world of decentralized finances, a corner of the crypto world, which aims to build an alternative financial system without a central decision -making body.

But strong declines in the past few months have destroyed $ 2 trillion or more than 70 percent of the total market value of crypto since November-which gives these decentralization dreams a strong thrust.

"I don't think many of these entrepreneurs planned this in their scenario analysis," said Stephen Diehl, a software engineer who has become one of the most distinguished skeptics of crypto. "It really speaks for a deeper truth that most of the decentralization rhetoric in crypto at best is ambitious and, in the worst case, is just empty marketing."

supporters of decentralized financing or defi were influenced by the promise of a utopian financial future without a central intermediary such as a bank or stock exchange. These layers only increase the costs and make the financial system more inefficient, they say.

Instead, users can exchange assets, lend and borrow assets by using contracts that are defined in the computer code. Decisions on the future orientation of these platforms are often determined by a voice of people who have special governance tokens. They are often spent on development teams and early investors.

But Defi also acquired the call to be the wildest of the "Wild West" in the largely unregulated crypto world, with regular thefts of tokens worth hundreds of millions of dollars, as hackers, poorly conceived systems.

Last weekend Solend, a loan platform based on the Solana blockchain, suggested taking control of the wallet of their largest user. The operators feared the effects of the Solana Coinder falling under $ 27, a prize fell to $ 22.30 that threatened the profitability of the platform.

"[The Wallet] has an extremely large margin position that endangers the Solana protocol and its users," warned it. If Solana fell below $ 22.30, the waves meant the market that "should end up with unusual debts," warned.

Solend withdrew the plan for emergency powers after criticism from users, but said that it was "committed to protecting user funds, transparency and acting the right one".

Meanwhile,

Bancor led “enemy market conditions” as a justification for the temporary interruption of a service, which meant that users were no longer protected if their stored tokens were exposed to large market fluctuations. The Bancor team said that those who have the right to vote would ask to ratify the temporary break.

and maker dao, a collective that runs the stablecoin dai-a crypto token that is to be coupled to the dollar-voted to freeze a connection to the AAVE credit platform, since the latter of another struck credit platform, Celsius, is exposed.

According to Ingo Fiedler, co -founder of the Blockchain Research Lab and professor at Concordia University in Montreal, Canada, the operation of a trade network theoretically means that users have more say in the future of the project. However, this was not always the case, he stated.

"Governance is strongly focused on a few players who may be able to coordinate in order to change the rules for their advantage and at the expense of other users," said Fiedler.

The emergency plans were a justification for the global regulatory authorities, who warned that some defi projects were more centralized than their marketing suggested.

A report by the bank for international payment compensation this week asked whether defi projects could ever be expanded into an appropriate monetary system, since the developers could not predict every market movement.

"The impossibility of writing contracts to determine which measures must be taken in all eventualities requires that some central bodies enclose disputes," she said. More efficient methods for accelerating and processing larger payment volumes tend to lead to a stronger concentration of the computing power, added.

While the regulatory authorities warn of Defi's pitfalls, the market hits its own judgments. For some defi enthusiasts, the unplanned steps of Maker Dao, Bancor and such only destroy those who have never fully committed themselves to the defi ethos.

"This is a great advantage for really decentralized applications," said Charles Storry, growth manager at Phuture Dao, a defi project. "Users of real defi applications have no problems because there is transparency," he added.

But for others it is hardly more than the reality that is back on the financial markets.

"Politicians are right, decentralization is nothing new. There are new opportunities to act value, but the concept of a new unit that has no real centralization is not true," said Ian Taylor, Head of Crypto and digital assets at KPMG.

"What we will see is a repression of pretenders because they have bad risk processes," said Taylor. "We saw that again and again," he added.