How decentralized, really, is DeFi?
That’s a question sparked by Uniswap’s move to restrict investor access to certain tokens on its platform, seemingly in response to threats from regulators, and the topic of our column this week. We also explore the relationship between bitcoin difficulty and price and the meme fun that was had with Sen. Elizabeth Warren’s (D-Mass.) description of cryptocurrency developers as “shadowy super-coders.”
In our podcast this week, Sheila Warren and I were joined by my old friend and former CoinDesk colleague Noelle Acheson, who is now head of Markets Insights at Genesis, a CoinDesk sister company. The three of us picked apart a couple of prominent essays that were critical of Bitcoin and crypto assets. Have a listen after you read the newsletter.
The crypto founder’s dilemma – DeFi edition
It’s a question you hear a lot from crypto outsiders: Why did Satoshi Nakamoto choose anonymity? Why not write your name into the history books as a contributor to the march of progress?
I can’t answer the question definitively, of course. I don’t have Satoshi’s ear – not that I know of, at least. (He/she/they may well be among the many Bitcoin OGs (original gangsters) I’ve spoken to over the years.) But I do know this: If Bitcoin’s inventor was an identifiable human being or group of human beings, it would not have been able to grow as it has. In fact, it may well have died shortly after its birth, much like e-Gold before it or Liberty Reserve after it.
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One can imagine state or federal regulators knocking on the fully identified Satoshi Nakamoto’s door and hitting him/her/them with a cease-and-desist order for running an unlicensed money transmission business. The Bitcoin founder could have protested, “The network is decentralized”/“neither me nor my fellow node operators hold custody of customer assets”/“it’s code, protected by the First Amendment.” But the power of law enforcement at such times often means that nuances like that are lost.
There’s a lesson here for the folks who built automated money maker Uniswap as well as for other protocol developers in the decentralized finance (DeFi) industry.
Uniswap is a decentralized exchange. Unlike centralized crypto exchanges and wallets, it takes no custody of customer assets. In theory, it’s governed by a decentralized community, whose members use its native token, UNI, to coordinate voting on financial conditions and other elements of the system.
But last week Uniswap Labs, the company that launched the protocol, announced it would limit trading in certain financial assets on its site. Citing “a shifting regulatory landscape,” the company restricted access to tokens that are…
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