Blockchains, DeFi, DAO, and Web 3.0 in general, all carry the message of decentralization, and particularly of decentralizing financial systems. Decentralization means, for the most part, eliminating the trusted authorities that are involved in various types of transactions. Those transactions could be agreements (to be facilitated by decentralized smart contracts) and the transfer of funds in general (to be facilitated by Bitcoins and alike). Centralization of financial services is considered evil, because the middlemen often have their own incentives, and even when they don’t, they often charge a lot for their essential role in the system. As we move into the decentralized era, we have smart contracts, which enforce themselves using machine code, without a trusted executor, and Bitcoins, which carry value and can be transferred between people without them having to trust any specific or state-owned service provider. Nice.

This post is neither for nor against decentralization. As I see it, nothing can be said against what is essentially an option. A decentralized system is considered as such because it does not require a centralized authority, not because it does not allow one to exist. If you find that you really miss a middleman, then you can always appoint one. If you want the state bank to manage your Bitcoins, then nothing would prevent that. You get an option, and having options is always good.

This post discusses how suitable the current decentralized financial systems are, considering the world they operate in. My take, as the title may disclose, is that while decentralized systems are an excellent idea and a worthy option, their current implementation suffers from shortcomings that we will just have to fix before they can become mainstream. There are many shortcomings, of course, and who am I to even enumerate them, so I will focus on one: the decentralized systems today assume too much perfection; it’s not that they don’t work well — it is that they don’t fail well.

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