The SEC Defi Investigation: The Decentralization Theater

The SEC Defi Investigation: The Decentralization Theater

By xuanling11 | Crypto Learning | 8 Sep 2021


The U.S. Securities and Exchange Commission or SEC starts investigating Uniswap Labs, the developer behind Uniswap, one of the influential decentralized exchanges (DEX) on Ethereum.

Why SEC is suddenly interesting in Defi particularly DEX? Before we dive into the topic, let’s see how different Cefi to Defi.

 

What is Cefi?

Centralized finance or Cefi was originally invented several thousand years ago. The wide range of assets from cattle, land, precious metals like gold, silver, fiat currency, stocks, bonds, and more. It is centralized because there is a middleman who serves between each trade. All trading ledgers are data that not actual assets transact between until the last settlement. You as their customer will not directly facilitate such transactions but look at each transaction and final settlement. The idea is that an expert will operate behave of your under the trust system. 

 

If you lose the money, too bad that the market is under-performed. Users will not know the rules behind the operation and their faith will depend on how truly the expert will perform.

 

What is Defi?

Decentralized finance or Defi is financial management under peer-to-peer without third party involvement. You operate and manage your own assets directly.

 

Benefits from Defi

Three benefits offer by the Defi: transparency, control, and accessibility.

 

Transparency: users know the precise rules 

Control: users is the custodian of their own assets

Accessibility: anyone with the internet and computer can do it

 

What is the exchange platform?

It is a marketplace where traders can place their assets to exchange in different types where you can 1) do price discovery, 2) through an algorithmic trading matching engine, and 3) settle to make it clear.

 

What is CEX?

It is a centralized exchange platform that exists standalone to separate from custodians services such as banks. Because all transactions are happening on paper until the last settlement with the bank for security reasons.

 

What is DEX?

It is a decentralized exchange platform that you are your own custodian to directly trade through your assets. 

 

Transaction dispute from CEX

You may dispute your transactions if you have any reasonable doubt. However, you may only ask your expert to handle the situation.

 

Transaction dispute from DEX

You may not dispute any transaction as that will be the final transaction to settle with your assets.

 

The SEC’s concerns

The SEC believes that the DEX is only a place for investors to directly trade their assets but without protections. The platform rules are unclear to investors and investors can only play their unclear rules in the platform. It seems like a centralized platform system disguise with a decentralized system.

 

In conclusion

There are just some insights into what SEC may continue finding. It may change Defi completely or it may not.


Photo by Chris Liverani on Unsplash

Related articles:
Stablecoin is Not So Stable
CBDC: Stablecoin 2.0 or Stablecoin Killer
Chinese CBDC: the Ultimate Financial Weapon or Just another Copycat
DeFi Swap: Great Returns come with Great Cost
CBDC vs Cryptocurrency: the War of Privacy
Inflation vs. Bitcoin: How Speculation to Hedge Inflation has Failed in Short Term but may Create Opportunity in Long Term
Game of Three Kingdoms: CBDC vs. Cryptocurrency vs. TechCoin
Gold vs. Bitcoin: Digital Twin or Enemy
Volatility of Bitcoin: Threat or Opportunity
Lesson Learn from Robinhood IPO: Era of Crypto Exchange Comes to an End or a New Beginning?
Hypothetically, What if the Fed Fails to Control Inflation, Will Crypto Save Us?!
Stablecoin: We Ever Need Them More Than CBDCs
China FUD: Are We Done Yet?
SEC vs. Ripple: the Endless Game of War
SEC vs. Defi: What is the goal of the Defi?
City Coins: Are they the Era of New Coins?
Ethereum London Hardfork: How Hard does It Actually Fork?
Did the U.S. government just thumbs up on Bitcoin and down on Ethereum after the London Hardfork?
The End of Era for Crypto Exchange Platform?!
NFT: Digital Solution or Delusion?
NFT: The Future of Gamers' Assets
Is Bitcoin Untraceable Anymore?! It Depends!
Why Crypto Got So Political Suddenly: The Beginning Tale of Government Crypto Surveillance Program
Where are We Position Crypto at : the Problem with Money and Wealth
Crypto Hacking: How Did it Really Happen?
Bitcoin Mining Recover?! The Chinese vs. The U.S Strategy of Blockchain
The Legendary of Shitcoin: Meme to the 🌓 or Unique of 💎 or Simply just 💩
Defi: A Rainbow 5-Layers Cake
Crypto Economy: the Untold Speculative Financial System We will Live?
Red Alert: Lesson Learns from the Nearly Cashless Nation
Jack Dorsey’s Ambitious: Twitter wants to Become a Place of Freedom of Speech
What Categories Does Bitcoin Belong to or Does it Really Matter?
Quantum Financial System: The System Lost Itself in Quantum World
Doge 2.0: Who Let The Dog Out?!
Legendary Hacker: the White Hat into the Rescue
Crypto Hot Hub: The Best Place to become Crypto Incubator
EIP-1559: The Future of Ethereum Economy
Break the Fourth Wall?!
Robot Sucks: How Lousy Jobs AMMs Did to Ruin the DeFi
The Future of Cardano: as Clear or as Uncleared?
We Are Short for the Dollars: The Dollar's Liquidity Issue
Currency Comparison: Bitcoin vs Dollar
Patent the Blockchain: the Nonsense Action Shows a Worry from Big Tech Companies
Forget about Trade War: New Era of the International Trade
Ethereum Got Update Bug: A Blockchain Synchronization Problem
CBDC's Cross Border Payments System: Worse than Crypto
Bitcoin's Energy Concerns, Scalability and the End of Bitcoin Prediction
Unknown Author’s Hypothesis: Creator of PoW and PoS Hybrid Blockchain
Currency Debasement: Cryptocurrency Inflation Hedge Hypothesis Still Hold
Shitcoin Economy: Part 1 - Category
NFT Bubble: Does it Really Matter ?!
Shitcoin Economy: Part 2 - Regulations
Fiat vs. Crypto: Religion vs. Science or Vice Versa
Dogecoin 2.0: Doge Breeder Era
Shitcoin Economy: Part 4 - Technology
Buterin's Regret: Ethereum 8 Co-Founder Things
Tokenism: An Old Idea Get A New Invention
Shitcoin Economy: Part 5 - Detokenization
Bitcoin ETF May Not Be Such a Great Idea
Legal Framework of Virtual Currency
Bitcoin Lightning Network Explain
-------------------------------------------------------------------------------------
Disclosure: I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose cryptocurrencies are mentioned in this article. This information is only for educational

How do you rate this article?


24

0

xuanling11
xuanling11

A delusional author who is possibly a nut job without any questions whatsoever about expertise in the subject matters to write with a freestyle.


Crypto Learning
Crypto Learning

All article was written by a delusional author who is possibly a nut job without any questions whatsoever about expertise in the subject matters.

Send a $0.01 microtip in crypto to the author, and earn yourself as you read!

20% to author / 80% to me.
We pay the tips from our rewards pool.