DeFi pulls the curtain on financial magic, says EU Blockchain Observatory expert

cointelegraph.com:

As decentralized finance continues its victorious march — although the road is sometimes bumpy — some significant questions on its nature remain. How can DeFi applications be protected from becoming nonoperational under extreme stress? Is it really decentralized if some individuals have way more governance tokens than others? Does the anonymous culture compromise its transparency?

A recent report from the EU Blockchain Observatory and Forum elaborates on these questions and many others around DeFi. It contains eight sections and covers a range of topics, from the fundamental definition of DeFi to its technical, financial and procedural risks. Conducted by an international team of researchers, the report formulates some important conclusions that will hopefully make their way to the eyes and ears of legislators.

The researchers highlight DeFi’s potential to increase the security, efficiency, transparency, accessibility, openness and interoperability of financial services in comparison with the traditional financial system, and they suggest a new approach toward regulation — one that is based on the activity of separate actors rather than their shared technical status. The report states:

Cointelegraph spoke with one of the report’s authors, Lambis Dionysopoulos — a researcher at the University of Nicosia and a member of the EU Blockchain Observatory and Forum — to learn more about the most intriguing parts of the document. 

Cointelegraph: How should regulators approach information asymmetry between professionals and retail users?

Lambis Dionysopoulos: I would argue that regulatory intervention is not needed for that. Blockchain is a unique technology in the level of transparency and intricacy of information it can provide to