On Wednesday while speaking at the University College London’s Blockchain Research Center, Carolyn Wilkins, a Bank of England financial policy committee external member stated that Decentralized finance (DeFi) isn’t as decentralized as it appears to be.
According to Wilkins, senior advisor to the Bank of England, “Concentrations of power in [proof-of-work] and [proof-of-stake] systems, and other flaws in the governance of crypto and DeFi, have already contributed to all-too-familiar issues; top of the list are business failures, illegal activity, and financial losses for investors.”
She went on to appeal to the private sector to play a stronger role in developing best practices for the cryptocurrency industry.
Wilkins referred to a report on cryptocurrency and decentralized finance from April 2022 by the National Bureau of Economic Research, which showed that the top ten validators held between 47% and 100% of the stakes in a sample of the 50 biggest proof-of-stake platforms by market capitalization.
DeFi investors should invest responsibly
She deliberates that if it continues to worsen, investors in crypto-based financial services and their clients may lose faith, which could result in the broader spread of financial stress. She also requested the private sector and DeFi investors to ensure that the projects and digital assets they are investing in are safe and managed properly.
Wilkins highlighted that leadership teams have the ability to take emergency decisions on open-source DeFi systems like Polkadot and MakerDAO.
It is important to note that Wilkins is not the first person who has criticized the DeFi sector. Before this, several authoritative and influential bodies have already questioned the centralized nature of the DeFi industry.
As is evident from some claims in past, Samson Mow, the founder of JAN3 and former Chief strategy officer at Blockstream, caught attention in April this year for his negative comments on DeFi cryptocurrencies and projects.