I have already expressed some concerns when I cannot convince people to stake on pools instead of moving their funds to big exchanges like Binance because they offer better staking rewards (7 to 20% vs 5% for a pool), increasing the centralisation of the network.
Today, there are no financial incentives to stake with a pool. You get a better return by trusting a central exchange to hold your funds. And I am not optimistic about the long term consequences of this.
A network running on the pools of a few corporations gathering all the votes is not very appealing to me. It sounds very much like today’s central banking system, and I am not sure the average holder of the future global network will value the price of de-centralization as much as the community does today.
Exchanges can offer a better rewards because they have many financial tools to increase the ROI from your funds (staking, unclaimed rewards, loans, exchange fee, insurances etc…), and at the end of the day, they have room to give you a better return than a simple staking pool, and still be profitable.
I do not see a lot of solutions. I know a lot of energy goes into the fine tuning of the protocol parameters, but I am really not sure it will be enough to counter CEFI.
Another solution I can think about is to build a strong DEFI competition to this CEFI problem. A DEFI app cannot run a node and it could also add some randomness in the stake delegation, which would help small pools and the decentralization of block production.
If we get a kick-ass DEFI app or ecosystem, able to combine different financial tools in order to provide a return as good as a central exchange, then maybe there is hope for decentralization.
I am not at all a financial nor DEFI specialist. I cannot really develop much further than this post, but I feel that the actual trend and its long term consequences are under-estimated.
If what I say makes sense, maybe we should already put more energy into DEFI research, before CEFI gets too much power.
And if it is as fundamental as I think it is, maybe it could be tackled directly at IOG level to show the way and get at least one DEFI app able to compete with the CEFI offer.