Decentralized Finance Is 'Worst of Both Worlds' Says Litecoin's Charlie Lee

Francisco Memoria

Litecoin creator Charlie Lee has criticized the decentralized finance (DeFi) space, calling it the “worst of both worlds” shortly after a DeFi protocol was exploited via a flash loan.

As CryptoGlobe reported, DeFi protocol bZx was exploited by a hacker who created a single transaction taking out a loan for 10,000 ETH, sending half to Compound and to bZx, and using the first half to buy wBTC and sell it on Uniswap, while using the other half to short wBTC on the platform.

The attack netted the hacker $350,000 worth of ether. Days later, bZx was again exploited via a flash loan that took out 7,500 ETH, used half to buy the sUSD stablecoin and reuse it as collateral on bZx, to then manipulated the price of sUSD to both repay the loan and make a profit. The attack netted the hacker $640,000 worth of ETH.

Lee’s criticism came as bZx took down its Fulcrum platform after the exploits for maintenance. Per Lee, since it’s a decentralized platform it shouldn’t be possible for a centralized entity to take it down.

Per Lee, the DeFi space is a “decentralization theater” that doesn’t improve on the existing financial system as a single entity can shut down the platform, but it isn’t possible to undo the exploit “unless we add more centralization.”

Lee’s tweet was met with hostility from the Ethereum community, mas many pointed out he was attacking the decentralized finance space over attacks conducted against one project, comparing his argument to dismissing the internet in its early days because of email spam.

Others attacked Lee for the divisive comments and claimed he was doing so to “feel relevant again.” Other users agreed with Lee and compared the situation to that of IOTA, which saw the non-profit organization behind it pause its Coordinator node, which processes transactions, over a vulnerability in its Trinity wallet.

It’s worth pointing out that the total value locked in decentralized finance apps has hit a $1 billion all-time high earlier this month.

Featured image by David McBee from Pexels.