BIS says Defi is an illusion
Bank for International Settlements (BIS) shared his stance on the decentralized finance industry and described it as an illusion.
In the mid of 2020, the Crypto industry got a new concept i.e Decentralized finance (DeFi). This concept made the crypto industry fully decentralized with the concept of decentralized crypto exchange, where no one is the owner of any crypto exchange and everyone can make money by giving support with his funds and many more things. But as we know many things can be misused because of the money power like inserting and removing liquidity is the best example to manipulate the market.
The Bank for International Settlements (BIS) noted that numbers of applications and projects in the Defi industry are increasing day by day in the crypto space and also these projects have a better influence in the crypto market with the agenda of freedom because of a fully automated financial environment.
The BIS organization published a report on the Defi industry, entitled “Defi risks and the decentralization illusion”.
Through the report, BIS noted that most of the crypto projects in the Defi industry are just part of an illusion i.e they are not decentralized in nature. And also Defi has no potential to give financial operational freedom, even very little.
“At present, (defi) has few real-economy uses and, for the most part, supports speculation and arbitrage across multiple crypto assets. Given this self-contained nature, the potential for defi-driven disruptions in the broader financial system and the real economy seems limited for now.”
Further, through the report, BIS noted that all those Defi exchanges, which claimed that they are highly decentralized over the centralized crypto exchange, are not truly decentralized. And all these Defi exchanges have similar kinds of centralization risks.
“All deFi platforms have an element of centralization, which typically revolves around holders of “governance tokens” (often platform developers) who vote on proposals, not unlike corporate shareholders.”
Further, BIS pointed out that the Defi exchange trade and prices can be manipulated by those people, who own tokens in bulk.
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