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Two days ago, the global crypto community was thrilled by the news of the Fulcrum DeFi ecosystem hack. It was shut down through the bZx financial primitive used for trading on Fulcrum. It looks like decentralized financial applications have never been chastised so severely.
The worst of both worlds
Charlie Lee, the creator of Litecoin (LTC), went on a rampage when describing the situation with Fulcrum and bZx. Mostly, he addressed the 'decentralized' nature of DeFi. According to him, they not only can be shut down by a centralized party but can't even be repaired unless more centralization is added.
The actual level of decentralization in such systems, according to Mr. Lee, should be compared to 'decentralization theatre' or even 'Decentralized Fiatre'. Finally, he asked a solid question about what edges DeFi has over traditional fiat financial tools.
According to research by Mudit Gupta, an ex-Google software engineer and blockchain enthusiast, an anonymous hacker cheated the system of Fulcrum DeFi service using margin trading and exchange features.
Through a series of manipulations with crypto loans he/she made the price of Wrapped Bitcoin (WBTC) skyrocket on the Uniswap exchange which resulted in 2300 ETH lost by bZx. At printing time, this amount of crypto is worth more than $575,000.
Jimmy Song agrees
Jimmy Song, well-known Bitcoin (BTC) researcher, evangelist and developer, sided with Mr. Charlie Lee. He outlined the fragile and centralized nature of DeFi.
According to Mr. Song, Bitcoin (BTC) is a much better and solid instrument than DeFi. He believes that we should avoid putting Bitcoin (BTC) and DeFi in the 'same universe, let alone the same category'.
As reported by U.Today, Brad Mills, venture investments partner and host of Magic Internet Money podcast, recently called DeFi 'Digital Forex'. Erik Voorhees of Shapeshift challenged this assessment.