Access to decentralized financing should be possible without central intermediaries. Unfortunately, most people are only now realizing how many of these entities exist and the damage they can wreak on the broader ecosystem. 2022 and beyond must be about self-sovereignty before things get any further out of hand. It’s important to look beyond promises of “high returns” and “convenient user experience” and focus on whether your crypto assets are at risk in the first place.
Rewards are worthless if assets are not secure
It’s not uncommon for companies in the crypto and blockchain space to advertise using words like “decentralization” and “user control” without meeting these standards. Just as the majority of exchanges are centralized and custodial, so are a significant number of decentralized financial protocols. This may seem surprising given that the term “decentralized” comes by default in DeFi. Just because a project uses smart contracts doesn’t mean there aren’t people able to pull the strings.
This has become all the more evident in DeFi over the past few weeks. All of these “massive” platforms suddenly encountered problems almost simultaneously due to falling crypto prices and accelerated this process with their own failures. It’s further evidence of how centralized companies want to control user funds and use them as they please with little to no transparency. Additionally, users who provide these funds in search of rewards will not be able to receive their rewards if operations “have to be paused”.
Notable examples include crypto trading platforms Celsius and BlockFi, which together represent over $5 billion in user assets. They have disabled deposits, withdrawals, trades and other activities involving client funds. Additionally, Celsius suspended services weeks ago and still does not have an ETA to resume services. Such behavior is unacceptable and underscores the need for users to fight back and take control through self-sovereignty.
To make matters worse, crypto lender Voyager Digital is also ceasing operations. Like the other two providers, Voyager took risks with client funds in order to offer them high — but unsustainable — returns. The investment in 3 Arrows Capital and other companies has not paid off, but the end user will pay the price for this mismanagement. True ownership can only exist when the user is the only one who holds the private key, which is what DeFi is supposed to be about.
Self sovereignty is a must in crypto
While the examples above explain the current situation, these types of developments are not new in the land of cryptocurrencies. Centralized exchanges have held client funds hostage numerous times over the past decade, and users have migrated to decentralized exchanges — and self-government — as a result. For some reason, when decentralized finance came along, most of them capitulated and decided to give up this invaluable user control again.
Achieving self-sovereignty in DeFi is not an impossible task. Dozens of projects exist or are under development to facilitate this approach. Notable examples are
- portal: Staking, lending, derivatives and more on the Bitcoin blockchain
- Spirit – Open source lending and borrowing across multiple chains
- Uniswap/Sushiswap/PancakeSwap/1 inch: decentralized exchanges with trading, bartering and yield farming opportunities
- dYdX: Trade without custody on Ethereum, etc.
What is interesting is how the emerging self-government solutions are built on Bitcoin.
Like Portal, projects like Gamma, Zest, GoSats, Money On Chain, and Sovryn are all built on the Bitcoin blockchain. They do this through either Stacks or Rootstock, Bitcoin’s respective smart contracts and EVM-compatible ecosystems.
Users need to think twice before giving control of their funds to centralized players, especially when they don’t have their best interests at heart. Decentralized finance only requires peer-to-peer interaction, without people hitting pause to prevent users from doing anything. Start your journey of self-sovereignty today and remove funds from any platform that doesn’t meet this requirement before it’s too late.
Image by Karolina Grabowska from Pixabay
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