Cryptocurrency appeals to a certain demographic. It strikes me as attractive to the Libertarian crowd, the conservative bros who may be incels, think that private industry is always smarter than a government, and don’t trust actual money (fiat currency). And it helps to be a climate denier, because the most important cryptocurrency, Bitcoin, has, as the underlying value, the value of the amount of energy wasted in “mining” it (via its proof-of-work system). Besides the fact that it’s a Ponzi scheme, it should be outlawed for its environmental damage alone. And the fact that besides pure speculation (greater fool theory) it’s mostly used for criminal transactions.
But the bros love it because it is so different from traditional finance. So they call it “decentralized finance”, DeFi. Let’s compare it to traditional regulated banking.
Most real money exists only in bank deposits, on computers; currency and specie are only a fraction of the total amount in circulation. With a real bank, the money is an entry in a ledger on a very reliable computer system, backed up, with multiple computers or a “cloud” to keep it going all the time. The bank controls its ledger under strict rules and retail deposits are insured. The cost of transactions is low, in the pennies range if that. A central bank controls the total amount of its nation’s currency in circulation to keep it somewhat stable.
With DeFi, money exists in a blockchain, which is a distributed ledger that lives on computers. There are multiple copies of the blockchain; anyone can make a copy and join the fun. The integrity of the ledger and its transactions is based on a majority “vote”, via lots of wasteful computation, of its holders. The major blockchains have gotten quite large since each transaction ever made is on it, and it’s called “crypto” because it takes the owner’s secret password to move money from the otherwise-visible blockchain. These transactions each consume vast amounts of electricity too, so they cost tens or hundreds of dollars in power alone. (To be sure, the new “proof of stake” Etherium may have mostly solved that problem.) Now, because the actual blockchain is big and it’s expensive, a work-around is to have cryptocurrency exchanges. They maintain their own little sub-ledgers for the quantity of crypto on deposit. There are no rules or insurance (see: FTX), and the value of any cryptocoin is purely speculative. So retail crypto speculators or transactors don’t actually use the blockchain; they use an exchange, and hope it stays sound. But a run on the exchange can cause it to lose deposits (see: FTX, and others). Sort of like pre-FDIC banks.
So “Web3” and the crypto world are they say totally decentalized, except that the actual decentralized blockchain is in practice so unwieldy that management of it has to gravitate to a few large exchange firms, but they’re not banks because they’re not regulated or insured — it’s just Freedumb!