Thread by Joseph Lubin

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It always was and always will be about decentralization. Beware of centralizing wolves in sheep's clothing.

🧵1/15
People need to trust one another in order to do basic things together. But trust breaks down when there is misunderstanding, information asymmetry, or an imbalance of power.

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With peer-to-peer technologies like BitTorrent, Bitcoin, and eventually #Ethereum, we discovered that decentralized protocols & maximally decentralized replicated state machines were the key to building a new trust foundation for the planet.

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If everyone could directly inspect their own accurate copy of what happened and when, and if it was prohibitively expensive to change the recorded history, nobody could cheat the system.

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The salient difference between CeFi and DeFi is what or who the user has to trust. With CeFi users have to trust a business to manage funds and execute the business’s services.

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CeFi businesses have an adversarial relationship with their customers. DeFi code is a tool that supports a user’s intentions without an adverse or selfish agenda of its own.

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DeFi, or really all smart contracts deployed on Ethereum, *unify* trust and execution. Value moves according to how code is written.

Compare this to CeFi, which as @BillHughesDC points out, looks a lot like TradFi: www.coindesk.com/layer2/2022/11/07/money-crypto-versus-tech-crypto/

7/15
Crypto OGs regularly mutter when they hear of someone being victimized, “not your keys, not your coins.”

CeFi is a recipe for continued victimization.

DeFi still needs to mature further, but it represents greater economic agency for consumers.




8/15
I agree with @amandacassatt, that the silver lining of all this is a reminder of the importance of decentralization.

www.coindesk.com/layer2/2022/11/11/ftx-showed-the-problems-of-centralized-finance-and-proved-the-need...

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And proof is that despite these recent shocks to the crypto world, on-chain financial activity is humming as usual. Self-custody wallets are providing trustless access to swap between assets, and DeFi protocols are functioning as intended.




10/15
But let us be crystal clear. FTX and other centralized financial institutions do not represent what we are building in Web3. We are building a future where you don’t — shouldn’t — have to trust an institution to ensure you have access to your assets.

11/15
We can’t let these events define our industry; we must strengthen our work on zk privacy tech and “full stack decentralization” including user interface elements.

12/15
.@ConsenSys is also taking decisive steps to decentralize its own products and services (check out @MetaMask Grants and our intent to launch a decentralized infrastructure network with @infura_io ).

metamask.io/news/latest/building-an-extensible-world-with-meta-mask-grants-dao/

consensys.net/blog/press-release/infura-announces-plan-to-foster-a-decentralized-infrastructure-ecosy...

13/15
The time is now to move from outsourcing trust to organizations that have failed repeatedly, to a future where blockchains automate trust — where trust is explicitly intrinsic to the math and code of the system, and transparency and guaranteed execution are inbuilt.

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True #DeFi will enable real time automated proof of reserves (and eventually of liabilities), and will replace years-long reactive forensic audits and clean-ups with 100% proactive on-chain financial hygiene.

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