Shielding DeFi's Architects: The Quest for Secure Infrastructure

Welcome to Crypto Long & Short, your institutional newsletter. This week, we explore the need for protection of DeFi's core architects. Alexandra Levis shares expert insights, followed by Jennifer Rosenthal, chief communications officer at the DeFi Education Fund, who discusses the necessity of shielding the people building DeFi infrastructure. As traditional finance companies increasingly adopt DeFi-related initiatives, it's crucial to recognize the value of open-source, permissionless, programmable, non-custodial, globally accessible, and interoperable technology in upgrading the financial system. The DeFi Education Fund invites you to join in protecting the technology and infrastructure that make DeFi valuable, focusing on high-level policy objectives such as software developer protections. Recent discussions with Congressional leaders have been productive, with a bipartisan bill introduced to protect software developers from misclassification under criminal code. Meanwhile, Alexis Sirkia, chairman and co-founder of Yellow Network, analyzes Ethereum's scaling problem, arguing that the rollup model was flawed from the start, focusing on throughput rather than the actual constraint of value movement between participants. He advocates for state channels as a superior solution, allowing peer-to-peer transactions off-chain with the base layer serving as the enforcement mechanism. The industry is shifting, with the CFTC preparing to approve the first U.S. framework for perpetual futures, which will significantly impact the derivatives market. Rollups, by design, are not suited for this task, and the market is starting to realize that the real constraint was always trust at the intermediary layer. Other highlights include the devastating impact of smart contract exploits and Aave's market share slide following the rsETH exploit.