The cryptocurrency Wild West in Web3 requires attention and ethics. While one of the official missions of the SEC, in the USA, is to protect investors, the crypto sector often confuses technology with political decentralization. This confusion leads to malpractices and/or unethical activities. While investors and speculators are defined differently the protection applies to both.
There is no confusion in blatant frauds as FTX or Three Arrows Capital but there is a shadow of confusion in other actors in the industry: decentralization does not mean no ethics and no good practices.
When a new version of a DeFi protocol launches without an smart contract security audit, it is a red flag. Security audits do not guarantee full protection but they represent a fundamental step in the roadmap. Quality assurance in dApps significantly impacts security, as unresolved bugs can become vulnerabilities ready for exploitation.
It is worse if the protocol in question is backed by investment funds and operated with a high TVL (Total Value Locked). On the other hand decentralized technologies enables anyone to publish their smart contracts, which is great, from the creative perspective, but even if they don’t have the budget or intention to spend on security audits there is a line that is crossed when a lot of funds are in play or if they don’t notice investors AND speculators about that risk. If it is the case say it in a big neon banner!.
Finally, SEC Form F-1 prospectus and filings are a good inspiration for more ethically disclosing opportunities and risks. For example, the chip design company Arm Holding Limited has just launched its own and identifies business risks as RISC-V growth and security risks. They explicitly state and expand on “Errors, defects, bugs or security vulnerabilities in or associated with our products could expose us to liability and damage our brand and reputation, which could harm our competitive position and result in a loss of market share.”.
