Safeguarding DeFi Infrastructure Builders

Welcome to Crypto Long & Short, our institutional newsletter. This week, we focus on the need to safeguard the people building decentralized finance infrastructure. Jennifer Rosenthal, chief communications officer at the DeFi Education Fund, emphasizes the importance of protecting open-source, permissionless, programmable, noncustodial, globally accessible, and interoperable technology. She notes that traditional finance companies are embracing DeFi-related initiatives, and it's crucial to defend high-level policy objectives that make this technology valuable. Rosenthal highlights the bipartisan Promoting Innovation in Blockchain Development Act, which aims to protect software developers from misclassification under criminal code. Meanwhile, Alexis Sirkia discusses Ethereum's scaling problem, arguing that the rollup model was flawed from the start, as it addressed congestion by creating isolated liquidity pools that can't interact without bridge infrastructure. Sirkia advocates for state channels, which allow participants to transact peer-to-peer off-chain, eliminating the need for intermediaries. Other topics include the CFTC's preparation to approve the first U.S. framework for perpetual futures, the impact of smart contract exploits on the market, and Aave's market share slide after the rsETH exploit.