If DeFi Is Really Decentralized, Why Did a Top Developer Quitting Crash Dozens of Tokens?

Decentralized finance, better known as DeFi, is the hottest segment of cryptocurrency right now.

In large part, that’s because it goes even further than crypto’s goal of cutting financial middlemen like banks out of the payments process. It even cuts crypto companies out, leaving nothing but an autonomous, self-executing smart contract that lets the lending and trading platforms execute transactions without any human management at all.

DeFi is, its supporters claim, the end goal of decentralization — transactions with no human input needed.

So what does it say about the state of DeFi that more than two dozen cryptocurrencies crashed last weekend, dropping as much as 70% on the news that a highly regarded developer was quitting the industry?

Perhaps that Andre Cronje is a little too central to the decentralized projects he created.

The South African developer and his frequent partner Anton Nell were key to a huge number of very important DeFi projects, most notably the highly scalable Fantom blockchain and Yearn Finance, a top-yield farming project with nearly $3 billion locked into the protocol as of last week.

See also: PYMNTS DeFi Series: What is Yield Farming and Liquidity Mining?

Yearn’s YFI token dropped 7% over the weekend as word spread that Cronje had deleted his Twitter account and updated his LinkedIn profile to reflect that he was no longer a board member of the Fantom Foundation that’s seeking to build support and infrastructure for the blockchain.

It cratered another 10.5% in less than one hour on Monday, following Nell’s tweeted announcement that the pair “have decided that we are closing the chapter of contributing to the defi/crypto space.”

The Critical Individual

The tumbling prices — many of which popped back to a greater or lesser extent — are “a response to the news reiterates just how critical an individual can be to a crypto’s value,” India Blockchain Alliance Founder Raj Kapoor told the country’s Economic Times.

It’s worth noting that not only did the tokens associated with projects Cronje founded, like the new automated market maker Solidly (down 70%) or lending protocol Iron Bank (down 50%), but many tokens unrelated to Cronje projects but built on Fantom dropped as much as 30%.

Cross-chain bridge protocol Multichain was down about a third, but it’s been falling steadily since a January code bug led to a $1.2 million hack ($1 million of which was returned).

Read this: PYMNTS Crypto Crime Series: With $1B Hacked, Cross-Chain Crypto Payments May Be in Jeopardy

Fantom Foundation CEO Michael Kong noted that the reaction was partly the result of the wording of Nell’s tweet, which concluded, “There are around ~25 apps and services that we are terminating on 03 April 2022.”

Saying he needed to “clarify a lot of misinformation going around,” Kong said, “Anton, who works with Andre, tweeted that they were ‘terminating’ 25 projects. This was misunderstood. They are ‘terminating’ their involvement, but handing over anything they run to the existing teams.”

On March 6, a top Yearn developer who goes by the name Banteg tweeted out in frustration: “People burying YFI, you do realize Andre hasn’t worked on it for over a year? And even if he did, there are 50 full-time people and 140 part-time contributors to back things up.”

There is also an aspect of this that is related to the number of new people coming into DeFi who are unfamiliar with how it works — including that the decentralized part means that once launched, projects are governed by votes of any governance token holder. Successful projects are generally worked on by many autonomous developers, who get rewards when an update they propose is approved.

See more: DeFi Series: Unpacking DeFi and DAO

Besides, Cronje’s decision was not unexpected. He rarely got any profit from the projects he developed, and has “rage quit” the industry before, citing a “toxic” and “adversarial” DeFi community, according to an August 2020 Decrypt interview.

Individuals like Cronje are influential, but no longer vital once the controlling DAO governance mechanism is launched. But it seems many investors don’t know that.

Which raises another question: Do people understand what they are getting into when they invest in what Sen. Elizabeth Warren (D-Mass.) recently called “the most dangerous part of the crypto world?”

Read here: Sen. Warren Calls DeFi the ‘Most Dangerous’ Part of Crypto at Senate Hearing