In short, I’m seeing people in crypto putting on a show. A facade. And after 10 years in the industry, first covering crypto for Bloomberg, writing The Infinite Machine, then founding The Defiant, it’s left me wondering if the magic is still here, says Camila Russo, founder of The Defiant and author of The Infinite Machine: How an Army of Crypto-Hackers Is Building the Next Internet with Ethereum.
Crypto projects are often portrayed as immutable protocols, removing intermediaries and controlled fairly via pre-written rules embedded in smart contracts. But, in reality, most DeFi projects can be controlled, censored and stopped by a few people. Decentralization theater reduces censorship-resistance and gives leverage to regulators or police enforcers to coerce developers into making changes, revealing information, or simply shutting the thing down.
Likewise, crypto’s governance systems are also theater. People are buying governance tokens as a proxy to owning a stock in a protocol or Dapp, and projects often treat governance tokens as part of their marketing and customer acquisition strategies. This leads to a plutocracy, where a few whales make all the decisions in DeFi.
DeFi’s total TVL moves between $40 billion and $60 billion, while monthly users never top three million. It’s the same money that’s being cycled between the same wallets, and it’s disconnected from real economic activity.
So why is this ecosystem putting on this show? Most people don’t have bad intentions. Founders are doing this because they think it’s what regulators want to see. To a large extent, protocol teams are responding to a hostile regulatory environment.
The answer is to keep after it. Chase the goal. Build the things that need to be built. But let’s lift the curtain on decentralization theater, and cut the B.S. Starting out more centralized is often necessary, but save everyone’s time and be transparent about it.