Letter #24: ShapeShift & Thorchain - Does Decentralization Have A New Meaning?
Hacking and the theft of information and money are common occurrences in any digital space, and cryptocurrency is, unfortunately, no different. Thorchain, a DeFi (“Decentralized Finance”) protocol for trading cryptocurrencies, was the latest blockchain entity to suffer, having recently lost around ~4,000 Ethereum tokens, around $7.6 million U.S. dollars worth at current prices. In response to the theft, network administrators temporarily paused the protocol, including access to users’ funds, in order to assess the vulnerability and release an update.
But wait….should a truly “decentralized” protocol have network administrators? And should network administrators have the ability to freeze the protocol and restrict access to users’ funds if the protocol is truly decentralized? These developments call the current level of decentralization of the Thorchain protocol into question.
Truth be told, “decentralized” has turned into a frequently-used buzzword that new blockchains, protocols, organizations, and more use to drum up interest and support during launch. Decentralized networks are certainly out there. But as time goes on, it becomes more and more important for the average user to understand what decentralization truly is, and be able to weed out the pretenders as a result.