A seasoned crypto hedge fund with $4.5 billion price of belongings beneath its administration is asserting the prevalence of decentralized finance (DeFi) ecosystems.
In a brand new letter penned by CEO Dan Morehead and different executives, crypto hedge fund Pantera Capital says that the DeFi sector is head and shoulders above centralized finance (CeFi) resulting from its transparency and “rock-solid” foundations.
Based on Pantera Capital, DeFi protocols lack the subjectivity and human fallibility that’s current in conventional transactions performed by CeFi programs.
“DeFi, not like opaque centralized finance, shouldn’t be an empty home of playing cards. Its foundations are rock-solid, rooted in immutable code, and completely clear. In some instances, DeFi removes human subjectivity solely from, e.g., financing choices.
Events agreeing to conduct transactions brazenly and transparently on the blockchain – versus backroom offers by opaque, human (i.e., fallible), doubtlessly interest-conflicted monetary actors – is the imaginative and prescient we must be striving for, moderately than clinging on to inefficient centralized monetary programs.
DeFi has by no means ‘sinned.’ The principles of engagement are coded into the sensible contract. You do not want to belief a counterparty who could also be incentivized to twist the reality, nor depend on belief to interact in monetary transactions. The code simply executes what each events agreed to.”
The crypto hedge fund additionally says that the transparency of DeFi platforms assist shield traders from CeFi as centralized entities are sometimes compelled to make use of DeFi for his or her loans, placing their funds out within the open. Pantera references the collapse of lending platform Celsius, which had a whole bunch of hundreds of thousands of {dollars} of loans that might be tracked on-chain on the time of its chapter.
“You could possibly say that DeFi, resulting from its self-discipline for over-collateralization, protects you from CeFi. Celsius was compelled to prioritize paying down its $400+ million DeFi loans on Maker, Aave, and Compound to stop its collateral from being liquidated.
There isn’t a potential to ‘re-structure’/renege on sensible contracts. In DeFi ‘a deal is a deal’ – you’ll be able to’t again out. All centralized finance firms are compelled by sensible contracts to pay again the DeFi protocols.”
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