Every time there's a story about a Bitcoin and ETH purchase by institutions, I question how any of this ends.
Because when you look at the practices, it doesn't suggest that these traditional entities are coming in to play nice or contribute to the fundamental values of the ecosystems or markets.
All the data points to an appetite for dominance, for control. Every purchase gets them closer to securing more than enough influence to determine the economic direction of these projects, protocols and networks.
The risk to DeFi
Decentralized finance requires decentralized governance, without it, nothing about the finance is decentralized.
That said, at the same time, it is not enough that one market or project or network is decentralized, the industry's sovereignty requires more.
Why you ask?
Markets will trend towards interconnectedness. BTC will have exposure to ETH and vise versa.
This exposure means that if one of the markets are threatened, the other is exposed to similar threats.
So you see, at the very least, the biggest markets and the medium tiers all have to be provably decentralized.
If the Top 20 crypto assets are not decentralized, then we can conclude that this market, this industry is far from its intended design.
Absorbance
Every time I think about the sovereignty of this industry, decentralized acquisition always comes to mind.
This is the absorbance I speak of.
I think that a future where DeFi absorbs itself for preservation is inevitable.
This isn't like traditional acquisitions that seeks to eliminate the independence of the acquired.
There are multiple ways this can happen, in fact, current tech which I've argued to promote supply centralization can be used to absorb DeFi into itself.
The irony right?
You know the saying: a tool can serve different purposes, it just depends on who holds it.
Solutions like restaking and liquid staking can be leverage to draw alternative projects or protocols, voluntarily into another.
This is the approach that comes with minimal capital exposure since incentives isn't the only cost involved.
The scenario with the most capital exposure would be outright acquisition of native governance assets.
If DeFi project A (a decentralized one) has the reserves or community to pull off the acquisition of threatened DeFi project B, it will have to at some point for sovereignty preservation.
The goal of course is never to acquire it all, but to acquire enough to maintain provable decentralization.
The industry has to come to realize, at some point, that collaborative building will be more important than competing. I mean, it's expected that projects or ecosystems could see the fail of another as a market opportunity, but it's important to see that opportunity necessitating stepping in because not every falling of a giant leaves a market gap or hole to fill, and if there's broader ecosystem exposure, the impact will go beyond the fallen.