The Blockchain ecosystem relies on distributed ledger technology and its promise to make systems and processes cheaper, faster, inclusive, and permissionless. The use of the word “decentralised” has become central to advocacy discussions as well as daily conversations about digital assets. However, it is a loaded term that entails governance, economic, management, processing, and legal attributes. The degree of decentralisation across these attributes needs to be examined, clearly defined in a spectrum, and evaluated for the benefit of the current and the future participants of crypto networks as well as other stakeholders, including public policy makers and regulators.
What is decentralisation? How can we define the spectrum of decentralisation? How decentralised are the leading crypto networks right now? How are market forces impacting it? What are the main benefits of decentralisation in Decentralised Finance (DeFi)? What are the risks and vulnerabilities associated with decentralisation?
These were some of the themes discussed at an invitation only ThinkTank session at the Singapore FinTech Festival 2022 hosted by Ecosystm and supported by Oliver Wyman:
- DeFi is a very broad term and needs to be clearly defined. “Decentralised” is a spectrum with governance, economic, management, processing, and legal attributes for crypto networks.
- To test the principles of decentralisation, an element of stress or concentration must be introduced, especially when technologies are still at a nascent stage.
- There has been a growing interest in DeFi in the banking space, and leading institutions are building teams to better understand the technology and how they can apply it to their business models.
- Along with institutional capital, transparency and trust are essential for progress. New technology comes with different risks, but finding the right balance between technology, processes, and security is key.
- Regulators are open to working together as they are also struggling to keep up with the fast-moving industry. Conversations with institutions, regulators, and law enforcement agencies are vital to understand how to implement and regulate different innovations.
Download Report – The degree of Decentralization in DeFi
(Clicking on this link will take you to Oliver Wyman website where you can download the report)
