This is part truth since decentralization exists in sequence and on multiple levels. The degree of decentralization in DeFi services varies since neither every component can be decentralized nor it should be
For example, let’s talk about categorizing decentralized Lending Protocols which can be done based on common components all DeFi lending protocols, such as custody, price feeds, provision of margin call liquidity, initiation of margin calls, protocol development, and interest rate determination.
Degree 0 Defi aka CeFi:
Centralized Finance (CeFi) products are custodial in nature, use centralized price feeds, and initiate margin calls, provide liquidity for their margin calls, and centrally determine interest rates all centrally.
Examples – BlockFi, SALT, Celsius, Nexo.
Degree 1 DeFi:
These categories of DeFi products are non-custodial but use centralized price feeds, initiate margin calls centrally, provide liquidity centrally, centrally determine interest rates, as well as centrally administer updates and platform developments.
Examples – Dharma.
Degree 2 DeFi:
These level 2 DeFi products are non-custodial but have one additional decentralized component from the list while rest are centrally operated.
Examples – Expo, Nuo, ETHLend.
Degree 3 DeFi:
Degree 3 DeFi products are also non-custodial and have permissionless initiation of margin calls and provision of margin call liquidity, while the rest are centrally administered.
Examples – MakerDAO, Compound.
Degree 4 DeFi:
What’s different in these types of DeFi products are in addition to being non-custodial, having permissionless margin calls and provision of margin call liquidity, its price feeds are decentralized, while the rest two are centralized.
Examples – dYdX, Fulcrum.
Degree 5 DeFi:
Here, the interest rate determination is decentralized along with the first three components in Degree 4 DeFi, but the control for the platform developments and updates is centralized.
Examples – bZx.
Degree 6 DeFi:
In the last category every component of DeFi should be decentralized. But as of now no DeFi protocol is completely decentralized.