1inch’s Sergej Kunz talks at Dappcon

Sergej took part in the panel Decentralization And How To Speed It Up In Light Of Regulation.

Speaking at Dappcon’s 2022 edition in Berlin, 1inch co-founder Sergej Kunz discussed the issues of decentralization and regulation in the crypto space.

“For me, decentralization is a set of actors who have the same worldview, regardless of where they are [located],” he said. “If some of these actors decide to do something else, then we get a fork or a new branch, and the most efficient and valuable branch will win. This is what happens in blockchain forks we have seen.”

“It’s very important to make sure that there is no actor who decides everything,” he added. “Decentralization is very important for 1inch. Therefore, we introduced governance, which is still in development. From our point of view, decentralization could also be helpful in the real world to govern countries or, at least, companies, in the future.”

Discussing regulation in the crypto space, Sergej stressed that there should be balance between protecting customers and allowing developers to build innovative solutions.

“Regulators try to limit [blockchain projects’] functionality to protect retail customers and, maybe, also institutional customers,” he said. “But overregulation is also bad.”

“We should teach regulators about what we are building,” he went on to say. “We are innovating. In the last five years, a lot of innovation has happened in the space. We got automated market makers, we got decentralized approached to p2p interaction in exchanging assets, we got technology for privacy on the blockchain, like Tornado Cash.”

Sergej stressed that regulators have to be faster in reacting to what is going on in the crypto space, as “innovation happens every month, and one year in DeFi is like ten years in traditional finance.” At the same time, he said, regulators shouldn’t be too strict, as in the recent case involving Tornado Cash.

Commenting on OFAC’s sanctioning Tornado Cash, Sergej expressed true concerns about its ramifications for the crypto industry and developers working in it.

“I’m scared, personally,” he said. “Based on that move by OFAC, [the Dutch authorities] threw one of my friends, [Alexey Pertsev], into jail because he wrote part of Tornado Cash’s frontend java script code. He didn’t deploy the smart contracts, he didn’t govern the smart contracts, he didn’t run the frontend, he just wrote some open-source code.”

“From my point of view, OFAC attacked free speech and privacy, because Tornado Cash is actually based on another project, they used a lot of open-source code to build Tornado Cash,” Sergej elaborated. “This is innovation in our space, it introduced privacy on the Ethereum blockchain. [OFAC] acted too aggressively. They should have spoken with the community first.”

Meanwhile, to speed up the process of decentralization, the crypto space needs to onboard new users and new developers, Sergej said in his concluding remarks.

“To do that, we need some kind of regulation,” he concluded. “[The space] shouldn’t be overregulated, but it needs to be compliant with real-world financial standards, and then, [it] will grow.”