Mainly financial security and risk prevention.
What is DeFi? I won't say much here; people in the square should understand. If not, you can look it up yourself.
Characteristics of DeFi: decentralization, anonymity, and cross-border liquidity.
The risks are as follows:
- Risks of illegal fundraising, fraud, and Ponzi schemes:
DeFi projects lack regulation and can easily become breeding grounds for scams, pyramid schemes, and Ponzi schemes.
- Market manipulation and extreme volatility:
Cryptocurrency prices are highly volatile, and DeFi lending, leveraged trading, etc., can trigger systemic financial risks.
- Money laundering and illegal trading:
Anonymity may be used for illegal activities such as cross-border money laundering, tax evasion, and terrorist financing.
Let's analyze the simplest case: money laundering.
1. DeFi vs traditional finance: difficulty of money laundering differs.
In the traditional banking system, KYC and AML (anti-money laundering) regulations are relatively mature, and the flow of funds can be traced.
And in the DeFi field:
- High anonymity: Many DeFi projects do not require real-name registration, and funds can be concealed through mixers (such as Tornado Cash) or cross-chain bridges.
- Unobstructed cross-border flow: DeFi funds can be transferred globally in an instant, evading foreign exchange controls and capital flow regulations.
- Exploitation of smart contract vulnerabilities: Frequent incidents of hacking, rug pulls, etc., making it harder to recover stolen funds.
Our OKX wallet has been hacked before, with losses of about 100,000 that cannot be recovered. Pure loss resistance.
Regulatory difficulty comparison:
- Traditional financial money laundering → Banks can freeze accounts, and law enforcement can track funds.
- DeFi money laundering → Unless there is on-chain analysis and cross-border cooperation, it is very difficult to trace.
- DeFi makes money laundering harder to catch: anonymity + decentralization = skyrocketing law enforcement costs.
- High risk of financial instability: The collapses of LUNA in 2022 and the FTX crash prove that the DeFi market is highly volatile, and ordinary investors can easily lose everything.
- Risk of capital flight: Our country has strict foreign exchange controls, and DeFi can become a channel for illegal capital outflow.
Even so, I still really like this technology and love this industry.
Did you pay tuition?
