Decrypt is a great crypto news outlet that I read on a daily basis, but something that they posted today triggered me a bit. “A truly decentralized exchange is about to go live,” read the title of their piece on an exchange called DeversiFi.

Their basis in calling this a “truly decentralized” exchange is that governance is handled by a decentralized autonomous organization, (DAO) that controls power through a system of checks and balances. This feature by itself doesn’t make the exchange decentralized as there can be other centralized factors. On top of that, Maker already has a similar system in place for Dai, where people holding Maker can essentially govern the Dai token.

Unfortunately, in order to prove my point, I will have to tear down just how non-decentralized DeversiFi is, even though I like their product. First off, 1/3 of their pairs trade against USDT, a coin that is (supposed to be) backed 1:1 with dollars. Trading with a coin that only has value because an organization is holding funds to back it is inherently centralized. Not to mention, USDT is one of the riskier backed stablecoins.

Second, they advertise “unmatched liquidity” thanks to “hybrid architecture” built off on the backend of a centralized exchange. We confirmed with DeversiFi that they do infact pull liquidity from decentralized exchanges.

“We pull liquidity from centralised exchanges, meaning that essentially it is DeversiFi that takes any counterparty risk instead of the trader,” said Ross Middleton, CFO at DeversiFi on their Telegram.

He continued to say that their model will be able to handle thousands of trades per seconds. Speed is a reason why many decentralized exchanges opt to being hybrid. “Fully” decentralized exchanges have problems with liquidity and speed.

Either way, it is not a completely decentralized exchange based solely off of the fact that they trade USDT pairs. But it’s not just them, there are no truly decentralized protocols in DeFi currently. In order to be completely decentralized, according to Kyle Kistner, an exchange has to have decentralized price feeds, margin calls, provide decentralized liquidity, determine interest rates, administer platform developments and updates all in a decentralized manner.

Kistner is one of the only people in the DeFi space to put out a criteria for decentralization, he also is a founder of the bZx protocol. We reached out to him to confirm our opinions and he believes that DeversiFi is not fully decentralized. That being said, he also says it doesn’t fit into his rating metrics because it is an exchange, not a protocol.

“STARKs have an element of centralization to them, as do matching engines. I wouldn’t say that it (DeversiFi) is 100% decentralized,” Kistner told me on Telegram.

All of this is not to say that being fully decentralized is the only way to go, but to differentiate between a marketing tactic and reality. People in crypto love decentralizing all of the things, but we are not at a place where that is a reality.

This article was updated to include quotes from Kyle Kistner and DeversiFi representatives