DeFi vs FastFi – The Daily Gwei #104 The Daily Gwei

There’s this concept that’s been rattling around in my head for a few months now and I’ve come to know it as “FastFi” or “fast finance”. Basically, it’s like DeFi on Ethereum in that it has similar properties (quick transfers of assets, “on-chain” liquidity, stablecoin support etc) but it sacrifices the 3 core pillars of a blockchain – censorship resistance, decentralization and permissionlessness – in order to achieve scale. Put another way, it’s simply a cheap imitation of Ethereum DeFi.

I don’t think the battle is actually between “centralized” vs “decentralized” – it’s between centralized platforms masquerading as decentralized and actual decentralized platforms. The masqueraders are usually referred to as “Ethereum killers” or “competition” for Ethereum but honestly they are not competing in the same space. I actually really like an analogy coined by Andreas Antonopoulos when he was describing Bitcoin and Ethereum – he posited that Bitcoin is a lion and Ethereum is a shark – meaning that they are both apex predators but of different environments. I think this also rings true for platforms that are embracing FastFi – though they aren’t apex predators – they are the things that the apex predators eat.

For those who haven’t read it yet, Balaji Srinivasan and Leland Lee have a famous piece called ‘Quantifying Decentralization’ where they attempt to measure the admittedly vast design space that fits into “decentralization”. It’s a long piece so I won’t rehash it here but the crux of it is that decentralization is not a binary thing – it’s a spectrum and various factors play into where a platform belongs on that spectrum. Some of these factors include factoring in how decentralized things like clients, developers, mining/staking, nodes and more are. Then, using this information, we can compute some nice graphs and charts that show the decentralization spectrum (check out the piece for those).

Preserving decentralization is a constant battle because the allure of centralization is ever-present and, if embraced, it can make the lives of core protocol engineers and users “easier”. Why spend years building a maximally decentralized system when you can take a few shortcuts and get a “sorta-decentralized” one? Well, building a sorta-decentralized system misses the entire point of building a blockchain and it doesn’t make anything “easier” – it just shifts the issues to a different domain. For example, instead of dealing with the issues that decentralization brings (lack of scale, slowness, high fees) a sorta-decentralized platform has to deal with the ever-present threat of a government being able to shut the system down, the lack of organic developer activity because most of them want to build actual decentralized apps and of course, building an organic community is basically impossible on shaky centralized foundations (see EOS for a perfect example of this).

I don’t know what the future looks like but I do know that myself and many others in the Ethereum community are not here for FastFi – if we were, then we would’ve either taken shortcuts to scale Ethereum (sacrificing the core pillars) or just left the community to join another platform. In saying that, I believe Ethereum will also eat the FastFi space at layer 2 while retaining the things that make it desirable. Though, the real challenge is always going to be making people care about the core pillars and unfortunately, broadly speaking, most people don’t (until it’s too late, at least).

Have a great day everyone,
Anthony Sassano

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All information presented above is for educational purposes only and should not be taken as investment advice.

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