# kaal:claim:3936876-040

**Claim.** Delegation of rights to custody providers is only an incremental step toward centralization via delegation to third party investment managers, and it opens a floodgate because each additional level of investment discretion over digital assets exacerbates centralization concerns and compounds rent seeking suboptimalities.

**Type.** failure  **Support.** argued

**Holds when.**

- delegation chains that begin with custody and extend to discretionary management

**Source quote.**

> This becomes a floodgate issue, as each level of investment discretion over digital assets exacerbates the centralization concerns and compounds the rent seeking suboptimalities.

**From.** Wulf A. Kaal, Hayley Howe, *Custody of Digital Assets* (2021), IV. Conclusion, page 32

**Cite as.** Wulf A. Kaal, Hayley Howe, Custody of Digital Assets (2021). SSRN: https://ssrn.com/abstract=3936876

**Verify.** sha256 of source PDF `9bc0903d01910460298e754c451f027df4324367359800a98ee8e638d94aff55` at https://raw.githubusercontent.com/wulfkaal/Academic-Papers/main/papers/pdf/Kaal%20and%20Howe%20-%202021%20-%20Custody%20of%20Digital%20Assets.pdf

**Failure mode.** delegation floodgate  (family: recentralization-drift)

**Topics.** governance-design, decentralization, defi

**Keywords.** delegation, centralization, rent-seeking, custody-providers, floodgate

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