While, as a concept decentralisation, allows each party involved to control and access resources rather than being administered by a single authority, there are pros and cons attached to it, just like any other burgeoning technology. “Decentralisation aids in the creation of a network free of subversion and corruption. Resources are equally divided with the same set of data in the form of a distributed ledger. Hence, every entity has access to a real-time, shared view of the data,” Poorvi Sachar, head, operations, Tezos India told FE Blockchain.
As per industry experts, decentralisation is cryptocurrency’s greatest strength as it follows a similar mechanism driven by the blockchain. “Peer-to-peer (P2P) transactions take place remotely and instantly without the intervention of any governing authority,” Shubham Gupta, chief product officer, STAN, stated. Furthermore, decentralisation allow to secure cryptocurrencies and thereby build a trusted medium of exchange. It is believed to play a critical role in terms of distribution of the control amongst the regular users who can take independent decisions. Inevitably, decentralisation minimises the chances of data loss during catastrophic events or hacks and ensures privacy.
On the flip side, data from Chainalysis — an American blockchain analysis firm show that hackers are stealing more cryptocurrency from DeFi platforms than ever. “Almost 97% of all cryptocurrency stolen in the first three months of 2022 has been taken from DeFi protocols, up from 72% in 2021 and just 30% in 2020. Digital thieves had a big year in 2021, stealing $3.2 billion worth of cryptocurrency,” the report stated.
Also, decentralised finance (DeFi) crypto works mostly under unregulated financial services are typically prone to money laundering, and other financial crimes. “A decentralised project can never work for the government and big corporations as it relies on centralised power. It lacks an authoritative direction making it difficult to maintain,” Dileep Seinberg, founder, CEO, MuffinPay, bill payment and utility crypto, added.
However, industry experts noted that there are technological barriers involved in actively achieving complete decentralisation. “On the practical level, taking time-bound decisions and ideal governance could be a major problem,” Sachar added.
Data from Chainalysis further revealed that seven of the ten largest attacks over the past fifteen months have targeted DeFi platforms in particular.
Furthermore, seven DeFi hacks have led to the theft of $1.6 billion, while the three exchange hacks have led to the theft of $960 million.