Defending DeFi Infrastructure and the Pitfalls of Ethereum's L2 Strategy

Welcome to Crypto Long & Short, our institutional newsletter. This week, we delve into the importance of protecting DeFi infrastructure builders and examine the shortcomings of Ethereum's L2 strategy. Jennifer Rosenthal discusses the need for policy objectives that defend the technology and infrastructure making DeFi valuable, including software developer protections. Meanwhile, Alexis Sirkia critiques Ethereum's rollup model, suggesting it was designed around the wrong assumption - that the limitation was throughput, not how value moves between participants. He advocates for state channels as a more effective solution, allowing peer-to-peer transactions off-chain with the base layer serving as the enforcement mechanism. The week's headlines and a chart analyzing Aave's market share slide after the rsETH exploit are also featured.