Safeguarding DeFi Infrastructure Builders

Welcome to our institutional newsletter. This week, we explore the need to safeguard the people behind DeFi infrastructure. Traditional finance companies are increasingly embracing DeFi, recognizing its potential to revolutionize 21st-century finance. However, it's crucial to protect the open-source, permissionless, and programmable technology that makes DeFi valuable. The DeFi Education Fund, a nonpartisan nonprofit, invites you to join us in defending key policy objectives. Recently, the Promoting Innovation in Blockchain Development Act was introduced to protect software developers from misclassification under criminal code. This act clarifies that certain regulations only apply to those controlling customer assets, not developers. As DeFi evolves, our collective voice can shape thoughtful policy outcomes. We should support initiatives that foster clarity, reduce uncertainty, and enable responsible participation in both centralized and decentralized markets. Additionally, we examine Ethereum's scaling problem, which was never just about throughput. The rollup model was flawed from the start, as it was designed to address congestion rather than the actual constraint of value movement between participants. State channels offer a solution by allowing peer-to-peer transactions off-chain, with the base layer serving as the enforcement mechanism. This approach eliminates the need for intermediaries and custodial chokepoints. As the market shifts towards regulated venues, infrastructure that can settle cross-chain in real-time without custodial intermediaries will be essential. Rollups, by design, are not suitable for this task. The market is starting to recognize that the real constraint was always trust at the intermediary layer, and infrastructure that eliminates this layer will attract capital and builders.