Protecting DeFi Infrastructure Builders: A Key to Unlocking Crypto's Potential

Welcome to our institutional newsletter, Crypto Long & Short. This week, we focus on the need to protect the people driving DeFi innovation. As traditional finance companies increasingly invest in DeFi-related initiatives, it's essential to recognize the value of open-source, permissionless, programmable, non-custodial, globally accessible, and interoperable technology in revolutionizing the financial system. The DeFi Education Fund invites you to join us in defending the policy principles that make DeFi possible, including software developer protections. Recently, the bipartisan Promoting Innovation in Blockchain Development Act of 2026 was introduced to protect software developers from misclassification under criminal code. Additionally, we examine Ethereum's scaling problem, which was never about throughput, but rather about how value moves between participants. The rollup model, designed to increase capacity, has instead produced isolated liquidity pools that can't interact without routing assets through bridge infrastructure, leading to fragmentation and security vulnerabilities. State channels offer a solution by allowing participants to transact peer-to-peer off-chain, eliminating the need for intermediaries. As the market prepares for the first U.S. framework for perpetual futures, it's crucial to develop infrastructure that can settle cross-chain in real-time without passing through custodial chokepoints. The week's headlines also highlight the growing bridges between traditional finance and crypto, as well as the devastating impact of smart contract exploits on the market.