Decentralized finance is the biggest scam in the cryptocurrency universe
Decentralized Finance is a lie. 99% of the Altcoins are unfortunately centralized scams.
Defi is actually Cefi
DEFI stands for decentralized finance. Projects in this space seek to rebuild the financial system. Financial services are to be brought into the digital new crypto world: Savings, Loans, Lending, Insurance, Borrowing,…
Why decentralized? The problem with the traditional financial system is that you are dependent on companies that are controlled centrally. Visa, Mastercard, Paypal or a bank can censor you, freeze your account, block a transaction or not open an account for you. The claimed solution is now decentralized finance built with blockchain technology (Many of these projects are built on Ethereum’s protocol.). There is no KYC, they are open systems and resistant to censorship.
It is unfortunately still centralized finance:
Defi does not have a secure foundation. Defi projects belong to a company with a CEO, an address and a legal department. Most coins had an ICO (An initial coin offering (ICO) is a type of funding using cryptocurrencies.) where the money was distributed to the founders and foundation. A simple search is necessary to find out how these projects/coins are not decentralized.
“Aave SAGL is a company incorporated in Switzerland, under license number CH50140228832 with registered office and principal place of business at Piazza Indipendenza 1, 6830 Chiasso, Switzerland.” — https://aave.com/term-of-use
You can write a message to the founder and CEO.
The ICO: “Aave began as ETHLend in 2017 after it raised $16.2 million in an Initial Coin Offering (ICO) to create a decentralized peer-to-peer lending platform.” — https://messari.io/asset/aave/profile
Claim: Aave is a decentralized finance protocol that allows people to lend and borrow crypto.
The “decentralized” address is San Francisco (HQ), CA, United States, 1 Fremont St, San Francisco
Maybe you want to write the CEO a message?
The Investors: There were two funding rounds with about 33.30 million from private investors.
Claim: “Compound Labs is an open-source software development company building tools, products, and services for the decentralized finance (DeFi) ecosystem.” — https://compound.finance/about
“Governing Law: These terms and conditions are governed by and construed in accordance with the laws of Switzerland and you irrevocably submit to the exclusive jurisdiction of the courts in that State or location.” — https://cardanofoundation.org/en/terms-and-conditions/
The registered address is: Cardano Stiftung, Dammstrasse 16, Zug, 6300, Switzerland. We work in close cooperation with our partners IOHK and Emurgo.
“Cardano distributed vouchers for 25.9 billion ADA in a public token sale from September 2015 to January 2017. Participants could redeem the vouchers for actual ADA through Cardano’s native Daedalus wallet. The three entities supporting Cardano’s development received 5.2 billion ADA following the mining of Cardano’s genesis block. Their allocation was as follows:
- 2.46 billion ADA were allocated to IOHK which voluntarily adopted the following vesting schedule for its Ada: A third of IOHK’s ADA holdings were immediately available to IOHK. A third was made available on June 1st of 2018. The final third of IOHK’s Ada will be made available on June 1st of 2019
- 2.07 billion ADA were allocated to Emurgo.
- 0.648 billion ADA were allocated to the Cardano Foundation”
See also here: https://cardano.org/genesis/
The ICO or public token sale is used to finance marketing, among other things. Promises are also made that attract private investors but are then not delivered. The founders and investors from the first token sale mainly benefit.
Claim: “It combines pioneering technologies to provide unparalleled security and sustainability to decentralized applications, systems, and societies.”
I hope you got the idea. I could have used countless other “decentralized” projects as examples!
People say about Ethereum that it is the new internet and Ether the oil of the internet.
“Ethereum was also originally funded through an ICO, which took place in 2014. Buyers received ether in exchange for bitcoin, and more than 7 million ether was sold in the first 12 hours of the sale, worth approximately $2.2 million. By the end of the sale, more than 50 million ether was sold, amounting to about $17.3 million. Controversially at the time, 9.9% of this ether was set aside for Ethereum’s founding team, and an additional 9.9% was allocated to the nonprofit Ethereum Foundation.” — By Cryptopedia Staff
The current supply of ETH is approximately 117 million. 50 million of it was allocated in the ICO and 20% belongs to the team and the Foundation? This is anything but legit. These Protocols don´t care about the underlying infrastructure. There are constant changes in the protocol, the software is changed and individual developers or founders have a decisive role. Also, the slogan/marketing of the coins is constantly changing.
In the case of Ethereum, for example, the blockchain was once changed retroactively (rollbacks) because there was a hack (Ethereum Classic was created): “On 20 July 2016, as a result of the exploitation of a flaw in The DAO project’s smart contract software, and subsequent theft of $50 million worth of Ether, the Ethereum network split into two separate blockchains — the altered history was named Ethereum (ETH) and the unaltered history was named Ethereum Classic (ETC).” — wikipedia
The protocol was constantly changed. It is even changed from proof-of-work to proof-of-stake now or it has different chain splits.
What is the point of decentralization and an immutable blockchain if it can be easily changed by the founder and foundation?
Not only the protocol itself is central. It also depends on centralized other companies:
More than 60% of Ethereum nodes run in the cloud, mostly on Amazon Web Services
Blockchains like Ethereum's are often pitched as self-sovereign money networks that operate independently of states…
This dependence was already causing problems: “Ethereum infrastructure provider Infura is down, crypto exchanges begin to disable ETH withdrawals.”
“Decentralized” Solana had to restart the network.
The CEO of a “decentralized” DEFI project (Compound) asks customers to return coins. :-D
“The Bonfida DEX is a fully decentralized! digital asset exchange.” — Marketing
When it is decentralized, why then do certain countries not have access? :-D
What does all of this mean?
The Foundation, the CEO, and the state have control over these projects. They are not decentralized. It’s just marketing.
- https://thorchain.org/: “DECENTRALIZED LIQUIDITY PROTOCOL: Deposit native assets into Liquidity Pools to earn yield. The network is 100% autonomous and decentralized.” They have a pause button: “It continued by saying that users’ funds “will be available when the issue has been patched & the network resumes.” In the meantime, it said, “The network has been halted.” — https://decrypt.co/76097/thorchain-drained-25-million-ethereum
- https://uniswap.org/: “Decentralized Trading Protocol” The foundation Uniswap Labs (60% of the UNI genesis supply is allocated to Uniswap community members) restricts access to tokens: “As of today, we have started restricting access to a small number of tokens at http://app.uniswap.org” — https://twitter.com/Uniswap/status/1418697012095164420
Decentralized Altcoin Checklist
- Is there a company address?
- Is there a team?
- Who are the investors?
- Was there an ICO?
- How many coins are owned by the founder and the company?
- What are the promises and have they been kept?
Decentralization is a spectrum (from 0 to 100). Bitcoin is fully decentralized, whereas f.e. Paypal is completely centralized. Defi is somewhere in between. You have to figure out if it’s worth investing for you.
Altcoiners often argue that there is a need for other projects besides Bitcoin because Bitcoin is supposedly too slow and you can’t build an ecosystem around it. I have dedicated this blog article to this misinformation:
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