Due to the open source, transparent, decentralized, and secure nature of DeFi, the imagination of encrypted assets shaped by code is richer. Therefore, in addition to the cryptocurrency market, the DeFi derivatives market is also being continuously explored by developers. But with the expansion of the derivatives market and the launch of some products, traditional finance has already felt the threat from the DeFi world. Tokenized stocks, options and financial derivatives have been affecting the nerves of regulatory sensitivity.
Regulation has always been the sword of Damocles hanging in the crypto industry. Now with the continuous growth of TVL (total lock-in value), supervision has focused on the DeFi sector. In the first two months, Uniswap Labs announced that it would restrict access to 129 tokens on the front end of app.uniswap.org. Most of these tokens fall into the category of tokenized stocks, options, and derivatives. In this regard, the reason given by Uniswap Labs is the “changing regulatory situation.” This is a testament to the increasingly severe supervision.
DeFi aims to create an open source, license-free and censorship-resistant financial market. The growth of DeFi volume has also affected the traditional financial market to a certain extent. Therefore, Gary Gensler, chairman of the US Securities and Exchange Commission (SEC), has repeatedly instructed the SEC to crack down on cryptocurrencies and the growing stable currency market.
DeFi and regulation
Due to the open source, transparent, decentralized, and secure nature of DeFi, the imagination of encrypted assets shaped by code is richer. Therefore, in addition to the cryptocurrency market, the DeFi derivatives market is also being continuously explored by developers.
But with the expansion of the derivatives market and the launch of some products, traditional finance has already felt the threat from the DeFi world. Tokenized stocks, options and financial derivatives have been affecting the nerves of regulatory sensitivity.
In addition to Ethernet Square outside on many financial derivatives, synthetic assets protocol, with the multi-chain development, more financial derivatives, synthetic assets protocol is deployed in the public chain of low-cost, highly scalable Gas on. Even CEX has also begun to launch corresponding tokenized stocks, supporting 7*24 hours of trading.
MirrorFinance on the Terra public chain currently provides services covering all stocks in the U.S. stock market, and is in a leading position in the field of synthetic U.S. stock trading. Although we cannot get dividends from synthetic US stocks, we can enjoy the dividends brought by DeFi-access to high-quality assets that require KYC without geographical restrictions.
Many financial derivatives agreements have also appeared on Solana. Digital Assets AG (DAAG), a financial instrument tokenization company from Switzerland, also launched tokenized shares on it, but the product is currently only available to FTX users.
Therefore, the US Securities and Exchange Commission (SEC) has begun to supervise the corresponding DeFi platform. However, because the DeFi platform is decentralized, does not involve cash transactions, and has almost no control over user assets, it is difficult for the US Securities and Exchange Commission (SEC) to supervise the DeFi agreement. In GaryGensler’s view, “there is still a core group of people” involved in writing software and managing each platform. Therefore, the goal of the US Securities and Exchange Commission (SEC) is DeFi developers.
According to the Wall Street sources said, Uniswap development team Uniswap Labs has been investigating the US Securities and Exchange Commission (SEC) is. A spokesperson for Uniswap Labs said that Uniswap has provided relevant information to regulators to assist in the investigation.
In addition to worries about financial derivatives and synthetic assets, supervision also has a keen interest in the ever-expanding stablecoin market. Some information indicates that the US Securities and Exchange Commission (SEC) may be investigating Tether and Tether Operation Limited. “We have a lot of casinos in the Wild West, and poker chips are these stable coins on the casino table.” Gary Gensler believes .
Not only regulators, as Tether USD, a widely used stablecoin in the crypto world, many people have doubts about the form of reserves behind it.
In Earlier this year , Tether disclose details USDT reserves, of which only 2.6% is in the form of cash as a reserve, and the rest is a secured loan, portfolio of corporate bonds, asset encryption, and other investment vehicles. According to the audit by Moore Cayman, an accounting firm that specializes in providing audit services for the investment fund and digital asset industry, as of June 30, all tokens issued by Tether have sufficient reserves.
In addition, illegal cryptocurrency money laundering activities are also related to DeFi. This area has always been the focus of regulatory agencies.
If the supervision bans the front end of the DeFi protocol
Let’s go back to the beginning scenario-Uniswap Labs restricts some functions of app.uniswap.org. If regulation restricts the front end of the DeFi protocol, can we still use the corresponding application?
The answer is yes.
As Uniswap founder Hayden Adams said in his response to this incident , UniswapProtocol is a fully decentralized, license-free smart contract on Ethereum, and app.uniswap.org is an IPFS hosted domain name owned by Uniswap Labs that points to the Uniswap interface. Uniswap Labs has the right to set some permissions on its website, but this does not mean that Uniswap is not decentralized.
In fact, we can still access the Uniswap protocol through decentralization (uniswap.eth.link) instead of app.uniswap.org managed by Uniswap Labs. uniswap.eth.link consists of a decentralized domain name ENS, a decentralized storage IPFS, and a centralized access port (eth.link or cloudflare) through which we can access the Uniswap decentralized front end in all browsers. If app.uniswap.org is restricted by supervision, we can use Uniswap through uniswap.eth.link.
In the current DeFi ecosystem, since we mostly use the traditional Internet for surfing in our daily lives, most DeFi protocols are still using centralized front-ends. Although this lowered the threshold of DeFi to a certain extent and improved the user experience, it also opened up the exposure to the supervision of DeFi.
However, there are also many protocols that explore completely decentralized access methods to varying degrees. Liquity hopes to build a startup kit to allow anyone to start their own front-end, just download the kit, fill in some parameters, and host the interface. And Burgerswap, the DEX protocol on BSC, launched the IPFS decentralized front-end: ipfs.burgerswap.org. Burgerswap’s IPFS decentralized front end uses the aforementioned cloudflare interface.
We might as well divide the front-end decentralization process into three parts: browser, decentralized domain name, decentralized storage, and computing.
Most browsers can complete the access of decentralized domain names. It is worth noting that, since current web browsers do not support decentralized domain names, access to decentralized domain names requires centralized access port bridging. But the exciting thing is that many browsers are beginning to support decentralized storage IPFS and computing, including mainstream browsers such as Chromium, Firefox, Opera, Brave, etc. They all support encrypted wallet plug-ins, and some of the platform versions of Opera and Brave already support The native access capabilities of IPFS and ENS domain names have been improved.
In addition, we can also access the corresponding Dapp through the wallet application.
When we talk about decentralized domain names, most of us are talking about ENS domain names. We can understand the ENS domain name as a simplified version of the Ethereum wallet address, which can be easily remembered, and its counterpart is the DNS domain name. Previously, the traditional Internet also completed information simplification through DNS domain names-now whenever we want to visit Google, we only need to enter google.com. ENS domain names often end in .eth.
In addition to Ethereum ‘s ENS, the Bonfida protocol of the emerging public chain Solana also launched a decentralized domain name service . The Bonfida domain name ends in .sol. Bonfida supports linking domain names with data on the chain. Websites hosted in IPFS or Arweave can be completely decentralized by using Solana domain names.
Through the above combination, we can access decentralized DeFi applications in a completely decentralized way, without being affected by regulatory agencies.
In addition, the decentralized CDN and file sharing platform Skynet also announced the launch of a new decentralized front-end application Homescreen, Homescreen allows users to install web applications in a very simple way, and will add users to Homescreen applications at the same time All codes and assets of the program are downloaded and stored in the user’s decentralized repository. When a user opens an application, the application will be loaded from the user’s repository, which enables the user to have an end-to-end decentralized experience.
But it is worth noting that while pursuing decentralization, we also sacrificed part of the user experience-which is contrary to the ultimate vision of Web3. In the future, there will be more complete and faster decentralized front-end solutions-that will be our only way to Web3.
However, we don’t know what kind of form the supervision will develop by then, and what kind of tricks it will have.
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/how-should-we-participate-in-defi-after-being-supervised-by-the-sec/
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