Litecoin’s founder, Charlie Lee, has publicly declared that he does not believe in DeFi.
In fact, yesterday he published a tweet in which he explicitly says:
“This is why I don’t believe in DeFi. It’s the worst of both worlds. 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.
So how is this better than what we have now?”.
This is why I don't believe in DeFi. It's the worst of both worlds. 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.
So how is this better than what we have now? https://t.co/F1HMSeqb6q
— Charlie Lee [LTC⚡] (@SatoshiLite) February 16, 2020
Lee refers to the recent problem with Fulcrum’s DeFi platform, quoting a DeFi Pulse tweet that reported the situation.
The fact is that the bZx platform, on which Fulcrum’s instruments are based, has been taken offline for maintenance due to the problem that caused the theft of ETH, revealing that there is a person able to turn it off and on again.
This, as Lee points out, is not true decentralization, because in a truly decentralized system there is not a single subject able to stop or suspend operations.
A similar comment was made a few days ago by Tone Vays against IOTA because, also in that case, faced with a problem that had caused a token theft, the system had been put offline because of the decision of a single subject.
For example, in a truly decentralized system like Bitcoin there is not a single entity that is capable of unilaterally deciding to suspend its activities and impose this decision on all users of the system itself.
Only a centralized system allows such an action and when this happens, the absence of true decentralization is publicly revealed.
To be honest, total decentralization is often very difficult to achieve, so much so that it would probably be better to talk about different degrees of decentralization.
Some instruments are only partly decentralized. Even Bitcoin has sometimes been accused of not being fully decentralized.
Nevertheless, the fact that there is a single subject able to decide unilaterally to suspend the activities of a system reveals the centralized nature of the system, because one of the first conditions that a system must have in order to be defined truly decentralized is precisely the absence of someone who is able to stop it.