August 15th, 2022

The recent news around Tornado Cash caught some in the crypto world by surprise. The Office of Foreign Asset Controls (OFAC) added forty-five Ethereum addresses associated with Tornado Cash to its Specially Designated National (SDN) list. 

This move bars all US persons from transacting with any of those addresses, and, as a result, numerous companies or projects with technological exposure to or integrations with TC have moved to cut those connections. Further, private companies, like Github, have removed TC repos from their platform and suspended the accounts of TC contributors. 

Whether OFAC’s approach here will “succeed” is unclear, though we hope that Treasury wielding a heavy hand does not indicate a trend against less controversial DeFi protocols. But if not outright sanctions, what should OFAC have done? On a grander scale, what is the right course of regulatory action in a permissionless, open-source, and fully decentralized environment? In previous blogs, we have defined decentralization, and how DeFi protocols can be regulated using the ocean analogy: while you can’t regulate the ocean or tides (decentralized protocols), you can regulate ports and harbors (users accessing protocols) and the activity on the water.

From our perspective, the correct way forward is not a one-off solution; it’s a multi-pronged approach focused primarily on two things: 

July 5th, 2022

The Decentralization Series: Part Four (Read parts One, Two and Three)

Review Decentralization

Defining blockchain protocol decentralization is difficult, but its consequences are easy to identify and understand. The first post of this series concluded that a protocol is sufficiently decentralized if it permits self-sovereignty, which means that a person or entity could engage with the protocol directly and do so freely without any undue external influence or control. 

The second post stipulated that achieving sufficient decentralization and maintaining it is challenging. However, if a protocol keeps this level of self-sovereignty, it is considered optimally decentralized.

June 20th, 2022

***By Steven Becker, CEO of UDHC, former President and COO of the Maker Foundation, which helped build Dai, a crypto-collateralized stablecoin.

May 23rd, 2022

The Decentralization Series: Part Three

Start with Reverse Engineering

Being optimally decentralized is about creating resiliency by sustaining a protocol in a state of sufficient decentralization. Protocols achieve this steady-state by initially iterating and balancing control, funding, and community development to eventually emerge with a decentralized workforce and governance framework. Both of which work towards sustaining the objective of the protocol.

But how do you get there? What are the paths to becoming optimally decentralized?

May 12th, 2022

As institutional interest in the cryptocurrency industry grows, it’s critical that bridges exist to onboard them in a safe, compliant manner.

Stablecoins are becoming more mainstream; Mastercard and VISA are accepting USDC as payment and JPMorgan’s JPM Coin for its global payments network.  The emergence of Central Bank Digital Currencies (CBDCs) is a sign that the major economic powers recognize the utility of digital currency.

Oasis Pro Markets (“OPM”) is the first Alternative Trading System (ATS) to be registered as a regulated platform for trading digital securities for digital cash.  Using stablecoins as digital cash enables transactions to take place onchain. Trades settle almost instantaneously as each subscriber has a pre-verified, digital ability to complete a trade. Subscribers of OPM are also approved for registered and exempt transactions, including transactions involving equity and debt securities, OTC securities, IPOs, and mutual fund securities. OPM’s customer base includes institutional and accredited investors, and they trade with other broker-dealers.

We believe that OPM is positioned at the forefront of digital securities innovation by leveraging blockchain and smart contract technology to expedite the transfer and settlement of assets. Beyond that, the team’s product suite is ripe for real estate-related products, including REITs and RMBS securities.

April 13th, 2022

The Decentralization Series: Part Two

Recall the Starting Point

Previously, our post - “On Being Sufficiently Decentralized” - stated that technological decentralization and self-sovereignty are the ingredients for a protocol or application being sufficiently decentralized. But, it is not a natural steady-state; it has to be maintained.

Reaching the state of sufficient decentralization is one thing, but maintaining it requires much work. Creating the right environment and framework to sustain this state is what Optimal Decentralization is all about.

March 24th, 2022

The Decentralization Series: Part One

Why Decentralization is Important

Decentralization is intuitively easy to understand but difficult to define precisely. Creating a blockchain-specific working definition helps attribute value to protocols and applications. Taken a step further, it can help identify the regulatory touchpoints for consumers and investors.

Decentralization describes an intention and level of control. For example, a system intended to be centralized could distribute power and become less centralized. Likewise, a decentralized system could accumulate power and still remain decentralized. The intention is important, followed by the degree.

February 16th, 2022

The Value in Gathering a Crowd

Trading venues first and foremost represent a gathering of people. For example, Amsterdam’s “First Regular Trading Market,” a gathering that started on a street named Warmmoesstraat in the fifteenth century, led to the first stock exchange - The Amsterdam Stock Exchange. In the late eighteenth century, a gathering under a Buttonwood tree in New York led to the most iconic contemporary stock exchange, The New York Stock Exchange. 

The objective of the gatherings was clear: to trade, while the people represented an ensemble of information, perspectives, and requirements that created the driving force for trade—the price. DeFi’s strength is in its ability to naturally generate a price discovery process within a versatile market structure created by its network of communities.

December 17th, 2021

Regulation and Web3 have been a subject of policymakers recently, with conversations becoming elevated around DeFi. As former Maker Foundation employees who contributed to MakerDAO’s decentralization, some key elements from our experience can help shape the conversation to be more transparent, more definitive, and more applicable.

Financial intermediaries are the foundation of financial services and the primary touchpoints for regulators, with activity-based regulation close behind. Decentralized Finance, or DeFi, has seemingly turned this on its head because, if decentralized with no intermediaries, will the traditional regulatory toolbox still work? The answer is yes.

DeFi is more about creating efficiency than disintermediation. Historically, the more technology develops, the more the incumbent intermediated architecture needs to change. However, intermediation does not disappear; it just shifts its resources around. Efficiency brings lower costs and an expanded user base, which also applies to DeFi.

Realistically, DeFi,  even thriving, is still a technology, a set of tools. Users care more about convenience and financial incentives than technology. For example, paying wages continuously to a struggling single parent - which DeFi can do - instead of every two weeks or monthly could remove reliance on expensive and extractive payday loans. But that means still working with a financial intermediary, still requiring a front-end providing that service while abstracting back-end integrations into DeFi.

December 7th, 2021

Today, we’re pleased to announce the UDHC, an initiative to bring DeFi to the mainstream. The UDHC will fund and guide projects that build on top of established DeFi ecosystems to achieve this goal. We believe in the amalgamation of Traditional and Decentralized Finance, where they will blend into a new, better, and more open definition of “Finance.”

Operated by former Maker Foundation employees and led by Steven Becker (Former President & COO of the Foundation), our experience allows the UDHC to guide and ensure projects build on a compliant arc of decentralization.

Let’s dive in: