Safeguarding DeFi Infrastructure Builders

Welcome to our institutional newsletter, Crypto Long & Short. This week we discuss the growing need to safeguard the individuals building DeFi infrastructure. Decentralized finance has seen a surge in interest from traditional finance companies, with many embracing the technology as a key component of 21st-century finance. However, as DeFi continues to evolve, it's essential that we protect the people behind its development. The DeFi Education Fund, a nonpartisan nonprofit organization, is working to defend high-level policy objectives that support the growth of DeFi. One crucial aspect is the protection of software developers, who are often misclassified under existing regulations. The Promoting Innovation in Blockchain Development Act of 2026 aims to clarify that software developers who do not control customer assets should not be subject to the same regulations as those who do. This legislation is a step in the right direction, providing much-needed clarity for the industry. Meanwhile, Ethereum's Layer 2 scaling strategy has been criticized for its design flaws, with many arguing that the rollup model is fragmenting the network rather than scaling it. State channels offer an alternative approach, allowing for peer-to-peer transactions without the need for intermediaries. As the industry continues to evolve, it's crucial that we prioritize the development of infrastructure that can support the growth of DeFi, while also ensuring the safety and security of its users.