Decentralization is the innovation in DeFi. Enterprise DeFi has two meanings whereas one refers to the enterprises using DeFi, and another is about corporations operating a slightly less centralized network using ‘’DLT’’, decentralized ledger technology, in a consortium environment.
In that case, the perspective varies from person to person. To some people’s views, it refers to the creation of new, decentralized web-scale enterprise structures and effective internet-based coordination mechanisms among persons. But some others think in a different way, for example, they think without centralizing DeFi software in the hands of legacy corporate structure, enterprise DeFi must decentralize the enterprise.
You cannot fully segregate decision-making by token-holder voting from the system of proxy voting. It is because back in the medieval ages, traders used to run mutualized lending, trading, insurance, money, and asset management services using similar decision-making systems. Because of the blessing of public blockchain technology, unknown participants are dealing on the Internet without needing to trust each other. It’s called CeFi (centralized finance) when enterprises lose the core aspects of decentralization at web-scale. Decentralization can be of two types including technical decentralization and economic decentralization.
Technical decentralization
Only any legal or natural person doesn’t control all functionalities of DeFi. The software is generally created for any decentralized product or service. In technical decentralization, anyone can contribute to the software. Anyone wanting to reuse the functionality can see it using a public permissionless blockchain. You can understand a blockchain to be not very decentralized seeing a crypto exchange runs and builds smart-contract-based applications on a public permissionless blockchain, but 95% of the commits to the blockchain coming from employees of the exchange.
Among others signs through seeing which you can prove a DeFi application not to be decentralized are such DeFi applications leave exchanges with the opportunity to reorganize the blockchain at will, and if the DeFi protocol founding team controls the admin key that can be used to make arbitrary code changes, then such a protocol is not very decentralized. But not all open-source software functions the same way. In short to say, the fewer a DeFi software incorporates rights and restrictions, the more decentralized the software is.
To embrace such technical decentralization, enterprises need to be commercially incentivized which is a hurdle to overcome. Such conception took root in the mind of enterprise entities as they think liability for non-performance of the software or the service.
Economic Decentralization
Control and liability are the two core aspects of economic decentralization. There are two questions here which are who makes the decisions and who has the liability for nonperformance. These two questions are considerable in the type of sole trader businesses, partnerships or corporations. Agents, whom are hired by shareholders to make decision on their behalf, are burdened with the liabilities for nonperformance.
The level of economic decentralization relies on the level of centralization in stakeholder voting and you will find aspects of decentralization within centralized corporations. The touch of centralization is also in DeFi protocol. The number of contributors of Bitcoin grew from three to a few hundred people over the last few years. Many arguments say like bitcoin has become technically more centralized as its value has gone up hundreds of times after the initial years of rapid decentralization.
Definition of enterprise DeFi
Enterprises are yet ignorant of the proper use of public permissionless blockchain technology that has kept them still apart from being economically decentralized. As a result of this, no greater fairness and inclusion in economic activity has yet enabled. DeFi and enterprises both can be benefited by both. DeFi protocols can be benefited by the robust software development, testing and development practices established in enterprise software. Enterprises can also take benefit using the smart-contracts in DeFi. DeFi’s growing liquidity also helps enterprises in taking benefit. More and more new innovation is going to take place to decentralize the enterprises.
