It's not a dumb question. You're right that it's absolutely an argument for DeFi, but it comes with tradeoffs:
- Bugs in the code means all capital may be lost. That's potentially worse.
- The profit margins aren't nearly as high. If you're a centralized entity or a bank you can do all kinds of shady stuff behind the scenes with customer funds to fill your own pockets. It has happened over and over again both in TradFi and CeFi. In DeFi, you can't do that since it's fully transparent and backed. Good for the consumer, but not not as good for business growth. Many traditional finance entities have become as big as they are because they did shady stuff but didn't get caught. I'm just not talking about crypto exchanges here, but also traditional banks.
- Bugs in the code means all capital may be lost. That's potentially worse.
- The profit margins aren't nearly as high. If you're a centralized entity or a bank you can do all kinds of shady stuff behind the scenes with customer funds to fill your own pockets. It has happened over and over again both in TradFi and CeFi. In DeFi, you can't do that since it's fully transparent and backed. Good for the consumer, but not not as good for business growth. Many traditional finance entities have become as big as they are because they did shady stuff but didn't get caught. I'm just not talking about crypto exchanges here, but also traditional banks.