As the Regulators Close in on Libra, It’s Time to Double Down on DeFi

The decentralized finance (DeFi) movement is perhaps one of the most significant developments in the crypto space over the last 12 months. During 2017 and 2018, there was much discussion focused on the adoption of blockchain by financial giants, and how this was detracting from the ethos of decentralization. However, the emergence of DeFi in the second half of 2018 defused that debate. 

DeFi represents the world of crypto standing apart from the traditional financial structures. It introduces new ways of managing finance for a digital generation that’s long become disillusioned with the ongoing misdemeanors of big banks. 

The Libra Imperative

Now that Facebook is making its move into crypto, regulators are circling. For so long, they’ve been reluctant to make any concrete pronouncements on crypto. Regulating that which is decentralized presents a conundrum. With no central point of control, to whom would they direct the regulation? 

However, in the days leading up to the Senate quizzing Mark Zuckerberg about his intentions for the Libra currency, the current US administration has started to make its feelings very clear. 

President Donald Trump declared himself “not a fan” of Bitcoin using his preferred medium of communication, Twitter. A few days later, Treasury Secretary Steven Mnuchin stated in a press briefing that he had “very serious concerns” about cryptocurrencies, including the proposal for Libra. 

In light of all this, it’s a pretty safe assumption that US regulators seem likely to come down hard on any attempt by Libra to bypass the traditional financial infrastructure. 

It’s true that countries such as China and Pakistan have banned cryptocurrencies. However, decentralization has proven censorship-resistant. Geoblocking may work for user interfaces, but the technology itself cannot be firewalled. 

Therefore, if crypto is to have a future, decentralization matters more than ever before. However, for decentralization to achieve maximum effect, the DeFi concept has to stretch across the entire blockchain ecosystem rather than limit itself to Ethereum. For this reason, interoperability is currently one of the biggest challenges facing the space. 

Taking on the Interoperability Challenge

Until the arrival of Bancor, centralized exchanges were the only means of trading tokens between different blockchains. Decentralized exchanges, developed on a single blockchain, are invariably limited to the tokens of their native platform. 

However, the Bancor liquidity network is the first decentralized, blockchain-agnostic trading platform that enables swaps between Ethereum and EOS tokens. Unlike an exchange, Bancor doesn’t rely on the idea of “trading pairs.” Instead, any EOS or Ethereum token can be traded with another. Currently, this means there are 140 tokens with over 8500 tradable pairs. 

Bancor intends to add more blockchains in future, in order to fulfill its vision of trading any token for any other token. This ability to exchange tokens cross-blockchain in a way that’s completely decentralized truly embodies the concept of DeFi.

In response to US regulatory pressure, Bancor also recently took steps to geoblock US users from its user interface. However, as the company pointed out at the time, the protocol itself remains decentralized and therefore, uncensored. 

Beyond Trading

Of course, in a truly decentralized world, blockchains could communicate freely with one another beyond pure token swap functionality. This is where Wanchain comes in. 

Wanchain’s cross-chain communication protocol enables the exchange of data, as well as assets, between different blockchains. The network can also host dApps, allowing applications to operate across other blockchain platforms. Basically, any Ethereum dApp or Bitcoin script can operate on Wanchain, with EOS integration set to roll out soon. 

Wanchain’s functionality has vast implications for the development of DeFi. If decentralized finance applications developed on Ethereum could communicate with Bitcoin, EOS, and other blockchains, they can become exponentially more powerful. 

Furthermore, Wanchain offers enterprises the opportunity to integrate their own permissions ledgers. One of the criticisms of enterprises such as Walmart developing their own distributed ledgers is that they are “walled gardens,” which fail to realize the connectivity benefits of blockchain. The interoperability offered by Wanchain can overcome these barriers. 

In a recent interview with Cryptopotato, Wanchain CEO Jack Lu even spoke of his support for Libra. He said that he doesn’t see Facebook’s plans as a threat; in fact, he even proposed that Wanchain could build a bridge to enable direct trading between Libra and other cryptocurrencies. 

A Wanchain-Libra partnership notwithstanding, Facebook’s plans currently threaten to derail crypto as we know it. Therefore, as users, we have a responsibility to support decentralization wherever we can. It’s the best and only way to safeguard the future of cryptocurrency once the regulators step in.