The term "DeFi" (short for "Decentralized Finance") refers to a range of financial applications and services that are built on top of decentralized blockchain networks such as Ethereum (ETH). These applications and services are intended to provide financial functionality that is decentralized, meaning that they are not controlled by any single entity or organization.
However, the first issue is the decentralization level of the blockchain networks on which DeFi is built. The decentralization can be measured with the Nakomoto coefficient, which represents the number of validators that would have to collude together to successfully slow down or block any respective blockchain from functioning properly:
As you can see, the top two networks used for DeFi, Ethereum and Binance, have a low Nakomoto coefficient, whereas Avalanche (AVAX) and Solana (SOL) have a higher one.
Furthermore, DeFi applications and services aim to be more open, transparent, and accessible than traditional financial systems, and to provide users with greater control over their own financial assets and data. However, it is important to note that the level of decentralization can vary among different DeFi applications and services, and some may be more decentralized than others.
For instance, as Sushiswap cannot afford to pay as much reward as what they have done so far, the CEO has decided to change the rules... Like a normal centralized company.
Overall, DeFi is an emerging and rapidly-evolving field, and it is still too early to say definitively how decentralized these applications and services will become in practice. However, many in the DeFi community are working towards the goal of creating truly decentralized financial systems that are accessible to everyone.
Disclaimer: this article does not contain any financial advice. The information is provided for general informational and educational purposes only.
