"CEFI vs. DEFI: Why Open-Source Matters in the World of Cryptocurrency"

The world of cryptocurrency can be roughly divided into two categories: Centralized Finance (CEFI) and Decentralized Finance (DEFI). One key distinguishing factor between the two is the open-source culture that pervades the latter. Specifically, in most DEFI projects, the underlying code can be forked and improved upon, thus creating new protocols that add value to the wider cryptocurrency ecosystem. This stands in contrast to CEFI and traditional finance (TradFi), where proprietary information and legal structures are subject to intellectual property rights.

In recent months, the SEC has taken legal action against a particular provider of a fiat-backed stablecoin, alleging that it is a securities offering. It is worth noting that similar providers have not yet been targeted. Were the technology underlying these various providers open-source, it would be far easier to compare the legal structures and coding of each, identify any differences, and modify parameters as needed to ensure compliance across the board.

Regulatory issues have become a recurring problem for cryptocurrency, often stemming from the proximity of CEFI to TradFi. CryptoEnthusiasts must take steps to address this issue once and for all. One potential solution is to focus on developing DEFI protocols and creating decentralized financial services that can operate outside of the traditional regulatory framework. By doing so, CryptoEnthusiasts can avoid getting caught up in regulatory drama and help to establish cryptocurrency as a legitimate asset class in the eyes of regulators and the wider financial community.