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The Financial Times cites a senior figure in the cryptocurrency industry warning that the decentralised finance sector is “at risk of attack”.
Good. A financial system untested by assault is one unfit for survival. Strength is measured not by the absence of attack, but the ability to withstand it — and DeFi, unlike centralised finance (CeFi), its bailed out predecessor, is strengthened through open combat.
From subprimes to collateralised debt obligations (CDOs), from Barings to Bear Stearns, the great systemic crises have not come from volatility, but from opacity. Yet it is precisely this opacity that incubates catastrophe.
DeFi, by contrast, conducts its business in the open. Like free speech, DeFi is a marketplace of ideas continuously stress-tested by adversaries, audited in public and refined by failure. Every exploit is a debate won in code; every fix, a lesson learned in public.
Centrally planned societies can censor ugly speech and paper over financial failures, but censorship and opacity create only the illusion of stability. Like free societies, decentralised systems are made stronger by their tolerance for dissent. It looks chaotic because it is — and that’s the point. In DeFi, problems are exposed when they’re small, not when they’re systemic. Protocols fail, fork, and harden; the code improves precisely because it cannot hide. It is the opposite of “too big to fail”: too open to deceive.
The 2008 crisis was opacity’s apotheosis, and DeFi is the corrective: a financial system whose immunity is earned through exposure to the elements, not insulation from them. Fail fast, fail publicly, fail small: it may be the most honest form of financial system we’ve ever had.
Nathan James Montone
Chief Executive, M31 Capital, New York, NY, US
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