The dream of disintermediating money from power and providing easy access to basic and complex financial products without fear or favor is dead. Despite being based on a series of technically innovative, open-source and interoperable protocols, decentralized finance (DeFi) “suffers from the same fundamental issues as the traditional finance sector. Greed is rampant. Hypocrisy is the norm,” said Dublin University assistant professor Paul Dylan-Ennis.
The death of DeFi was brought to the forefront when Curve Finance founder Michael Egorov found himself in a precarious position as hundreds of millions of dollars’ worth of personal loans he took out were in danger of liquidation. Egorov had leveraged up on CRV tokens he earned from his role helping to launch Curve, one of the most used decentralized exchanges.
The hack of at least three Curve trading pools put downward pressure on those loans, and had CRV dropped below a certain price (~$0.35) it would have triggered the programmatic sell-off of Egorov’s loan collateral. That would have likely kicked off a vicious cycle where the CRV price would continue to drop, forcing other loans into liquidation, which would cause CRV to drop even lower.
Egorov was able to pay off some of his debt, and buoy the price of CRV (now trading at around $0.60) with the help of monied traders like TRON founder Justin Sun. This raised questions about why Egorov was allowed to amass nearly half the total CRV supply, why no one intervened earlier, and why lending protocols don’t have caps on the number, or percentage, of tokens people can borrow against.
The flippant attitude to ever-present crime and calamity in the crypto industry makes sense because cryptocurrencies are literally fake internet money. Was it always a mistake to imbue them with any meaning beyond that?