The Single Greatest Attack on Decentralized Finance to Date

TL;DR

• The SEC intends to bring an enforcement action against Uniswap, a losing battle which will only help to push growth and innovation offshore.

Full Story

Very rarely do we update the title of this section…

But we did so today, because this story should take the lead over all others (and definitely doesn’t fit the title of “This is cool”).

Alright, let’s rip the band aid off:

Yesterday, the SEC informed Uniswap that it intends to bring an enforcement action against the company.

Which may end up being the greatest pressure test ever made on the decentralized economy — but will inevitably end in failure for the SEC and (sadly) for the US as a whole.

Cause here’s the thing…

There’s “Uniswap, the decentralized trading platform” — where users can trade/lend between themselves without the need for a middle man.

And there’s “Uniswap, the open protocol” — the coded rule set that powers trading (which anyone can build on top of).

Which sounds confusing…

But just take a look at what you’re doing right now (reading email) — it’s pretty much the same thing, but we’re trading information instead of crypto…

There’s “Email, the platform.”

Say you’re reading this on Gmail — what would happen if the SEC were to sue Google into oblivion, taking Gmail with it?

Would that be the end of email? Hell no! You’d just bounce to Apple Mail, or Outlook, or Proton Mail, or one of the hundreds of other platforms that use:

“Email, the protocol.”

Aka: the Simple Mail Transfer Protocol (SMTP) — a protocol which is open (aka: owned by NO ONE).

And just like SMTP, Uniswap’s open protocol isn’t owned by them — they simply plug in to it, alongside a range of other decentralized exchange platforms (the same way email platforms plug into SMTP).

Here’s why the SEC’s failure is inevitable:

Sure, the Commission may be able to rinse Uniswap (the platform) of a few million/billion in settlement fees, and parade it around as a win…but when it comes to suing an open protocol, well — they can’t. It’s a thing, not an entity.

(It’d be like trying to sue your bed stand after you stubbed your toe on it for the hundredth time).

And sure, they can order Uniswap to shut the protocol down all they want…but again — it ain’t going to work! Because Uniswap (the company) doesn’t own/control the protocol anymore.

Now, here’s where the US is going to get stiffed:

If the SEC succeeds in shuttering the Uniswap platform, it will only result in other (offshore) platforms popping up to replace it.

Pushing Violently shoving innovation and growth out of the country in the process.

@GaryGensler: two emphatic thumbs down.