What is the degree of decentrali

What is the degree of decentralization in DeFin?

Most of the decentralized financial projects are built on top of Ethereum with some interactive components:

1. consensus protocols;

2. assets;

3. smart contract protocols

smart contract makes new crypto assets possible, new assets then could soon become collateral which make more derivative assets possible, consensus protocals in the bottom layer makes them all possible.

Therefore, 2 and 3 rely on 1 which means the level of decentralization in 2 and 3 cannot possibly exceed that in 1.

Choice made on developers thoughts and design

Some assetes and protocols are built on top of Ethereum and built around the core principles of Ethereum, some others are not built in this way.

Uniswap is the decentralized exchange protocols launched in 2018.11 on the main net of Ethereum and funded by Ethereum foundation whose founder is Hayden Adams.

Hayden Adams emphasize the selection prolem in Ethereum, bitcoin and any other blockchain protocols : the scalability trilemma (blockchain system is hard to achieve below simultaneously:

1. Decentralized; 2, Scalability; 3, Safety

At present, there is no single blockchain could achieve high performance of those three. Although the consensus algorithm design are different between bitcoin and ethereum, both finally choose higher performance in decentralization and safety, the cost is the low scalability.

One thing need to be memorised: not eveything should be decentralized, but some indeed should be decentrialized.

ASSET

1、Bitcoin and ethereum——both represent the decentralized golden standard of all above assets. Both are in the layer of protocol which means in the aspect of custody and new supply are all handled in the protocol level. And both are transparent and open. Bitcoin and Ethereum supply rules are known( 12.5 btc /10min, 2 eth /15s) and could be validated. However, these tokens standard have some other risk:

Custody and ownership are handled by sm code;

Different tokens distribution amount are different, need to be checked in trustable source. OnchianFx is a source checking supply.

3、DAI——Maker stable coin DAI maintains most of the key property of eth, but by coordinating multiples sm and decentralized stakeholders, it adds much complexity. DAI is a ERC-20 token, deposit asset using sm, supply will be changed according to the market, which depends on CDP creation.

4, Offline custody ——The risk includes the transparency offered from agency in the procedure of custody and security.

Dont' be confused with open Finance and DeFin.

Some small contracts protocol and assets don't present too much decentralization, they are purely open and can be used for free. In other words, we can say some assets and protocols may be a component of [open finnace], but not [DeFin].

In fact, there is not a clear boundary between open Finance and DeFin, some are overlapped and mixed.

2016: 「blockchain, not bitcoin」

2017：white paper diluted original definition of blockchain

2018: 「DeFi」and「Open Finance」emerged， used to promote diversity of projects.

2019：Libra attempts to twist the meaning of [crypto currency]