DeFi Suffers from Too Much Centralization, What Can Be Done?

cryptonews.com:

"If any part of their business model incorporates centralization <...> then it is centralized no matter what other decentralized features it deploys."

"It is vital that people understand how the assets they are pledging to a centralized entity are being used."

'"If users demand more decentralization within crypto lending they simply have to vote with their funds by moving them."_____

Like much of the crypto sector, decentralized finance (DeFi) is having a tough time. Not only has its total value locked in fallen by 70% (per DefiLlama data) since December, but various platforms within the not-so-decentralized DeFi space have been threatened with collapse, with Celsius’ halting of withdrawals being the latest -- and possibly the most dramatic -- manifestation of the ongoing crisis.

While Celsius’ inclusion within the DeFi sub-sector nominally makes it a ‘decentralized’ platform (at least in its use of blockchains), its control over user funds demonstrates that it was too centralized. Coupled with the collapse of Terra (which had been the second biggest DeFi platform), it has raised serious questions as to whether DeFi needs to become more fully decentralized, and as to whether it can be.

Opinion on this is mixed, with some industry figures affirming that centralization provides various benefits over truly decentralized platforms. At the same time, there seems to be agreement that decentralization alone is hardly a guarantee against future collapses and crashes.

Figures within the industry are more or less in agreement that recent events involving Celsius and other platforms highlight the uncomfortable level of centralization within DeFi.

“Recent events concerning Celsius, Three Arrows Capital, and Lido show that lack of