Ajit Tripathi from Aave, a Leading DeFi Platform, Comments on Differences Between Technical and Economic Decentralization

Lex Sokolin, CMO at blockchain firm ConsenSys and Co-Head of Fintech and DeFi at ConsenSys Codefi, recently engaged in a conversation with Ajit ‘Half Boomer’ Tripathi, the Head of Institutional Business at Aave (AAVE), a leading decentralized finance (DeFi) platform.

Sokolin noted that they were joined by one of his former colleagues from Consensys, a Brooklyn, New York-based Ethereum (ETH) development studio.

They covered many important Fintech trends such as major developments in traditional finance, the enterprise blockchain and DLT consulting space, and also a “full-on” decentralized finance discussion.

While explaining what decentralization might mean in different contexts, Tripathi remarked:

“Decentralization has two parts. One is the technical decentralization, which public Blockchains facilitate, where you’re saying, ‘Look, Blockchain is not controlled by a bank,’ the technology infrastructure is not hosted by a bank, it’s not five guys in a data center that’s managing this thing. That’s technical decentralization, where you’re deploying a distributed financial service on the Internet. And then, there is economic decentralization.” 

Decentralization is somewhat of an abstract concept as it means something totally different depending on who you ask. There’s no widespread consensus on what may be considered a truly decentralized system or technology.

While many industry analysts, particularly Bitcoin (BTC) supporters, claim that the leading cryptocurrency is completely decentralized (or as close to it as possible), Ripple CEO Brad Garlinghouse and other crypto industry members have pointed out that BTC mining is a highly centralized activity as it’s mostly concentrated in China – which has an abundant supply of cheap electricity.

But prominent Bitcoin developer Jimmy Song had also commented on what to look for if you want to determine whether a particular cryptocurrency project is decentralized. For instance, if your project conducted an initial coin offering or ICO or did a pre-mine, then it may not be decentralized, according to Song.

While decentralization is quite a theoretical topic, it does have many serious, more practical, real-world implications. For example, Fintech firm Ripple has been charged with US securities laws violations by the Securities and Exchange Commission because of the unauthorized sale of its digital asset XRP – which is arguably a security and must be regulated as such.

But legal experts in the industry have pointed out that if Ripple’s XRP is deemed a security, then by the same logic, Ethereum’s ETH should also be classified as a security. Ethereum co-founder Vitalik Buterin’s Ether wallet currently holds over $472 million worth of ETH tokens. Buterin and the other Ethereum founders took part in a pre-mine several years back when Ethereum was launched. Legal professionals have argued that Ethereum (ETH) tokens could also be a security.

Notably, Buterin has been making really generous donations as the value of his Ethereum stash has grown dramatically with ETH now trading at above $1,300.

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