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18 January 2021

It’s time to mature: We need compliant decentralized finance

It’s time to mature: We need compliant decentralized finance


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We also run into challenges as bad actors find new ways to scam people out of their hard-earned money, and with new untested projects that capture value but are highly vulnerable to failures, bugs and exploits.

This means that DeFi projects should step up in terms of security, quality, user responsiveness and regulatory compliance.

Let me be clear: This is not an argument for allocating blame and liability for losses — these are, after all, decentralized projects, not financial institutions — but there are billions of dollars stacked on DeFi projects, and this should account for something.

So, what measures could DeFi projects, and the overall space, adopt to become more competitive and attractive to a wider client base.

In the case of DeFi, we could have one or two trusted anchors that could validate an address and conduct Know Your Customer diligence on the user.

There are plenty of blockchain projects out there that are not built under minimum acceptable standards, and it’s difficult for every user to go through the codebase and verify that the code is doing what it is meant to do.

This is a relatively new area in blockchain, but there are projects that are tackling risk management through decentralized insurance.

Insured projects can capture a wider audience that is willing to take on more market risk and less security risk.

I strongly believe that individuals should be free to choose whether to risk their wealth on untested projects, on volatile investments and on bleeding-edge technologies; we shouldn’t have to rely on governments to tell us where, how much and when to invest.

The less credible a project is — especially in comparison with, for example, compliant, audited projects — the less capital and user base will flow toward it

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