Thoughts on Decentralization
“True decentralization” is an ideology which is cypherpunkish. Instead of concentrating power in a centralized authority, it is dispersed among individuals. In cryptocurrencies, there is no central bank. Instead, it’s like each wallet becomes its own bank. However, ideologies are a form of perfectionism, a short-sighted solution for a complex problem.
There are pros and cons to decentralization. The idea is to design systems that are trustless, meaning you don’t have to rely on the word of other humans, but on mathematics and code. But it is humans writing the code. If it’s open-source in a truly decentralized manner, then it is your responsibility to check the code before using it. Most people do not have this skill. So they put their trust in the devs writing the code, or that other people will be monitoring and confirming that the code is sound, usually auditors.
By being your own bank, that means you are responsible for the security of your wallets. “Not your keys, not your crypto” means that if you’re using a centralized exchange, you don’t have control over your money, and are putting your trust in the exchange’s security to not be hacked and hope that they do not rug pull (shut down and take all your money, a scam). The technology is not ready for mainstream use because most people do not have the technological skills to be responsible for their own money. Making you record a private key or 12-word mnemonic phrase as the only way to access your funds is not user-friendly. Losing this means losing all your assets.
Even in DeFi projects, you are putting your hope in the devs. When a hack occurs I see some advocates for “true decentralization” be insensitive towards the victims, and not support steps taken by the central key figures to freeze funds or hard fork to revert the hack, because that goes against their ideal.
But when a hack happens to a project and its your funds that are stolen, it's nice for the big company or top devs to have your back and step in to take your side against the hacker. It's people in power helping normal people against the bad guys. Calls for true decentralization fly in the face of our human evolution towards cooperation, codependence, and justice. It tries to make it every person for themselves. If you got hacked, too bad, it's probably your fault for being stupid, so you don't deserve your money back. And this rewards the hackers who are able to get away with it.