New SEC Requirement for DEX Liquidity Providers

[zasad@]

I always show my opponents this link so that they understand what decentralization is.
It is a decentralized ecosystem, but it is not in demand.  Or do you think that enthusiasts will provide good liquidity in such ecosystems?

There is no point in counting enthusiasts separately from the regular users. If at some point the decentralized ecosystem becomes more widely used, then it will have more liquidity because users provide liquidity. Currently there are lots of non-KYC CEXes that are arguably easier to use than DEXes and that is why all the "excess" liquidity goes to the non-KYC CEXes instead of the DEXes. If these non-KYC exchanges are forced to stop working or start requiring KYC, then all that liquidity will move to the DEXes.

https://defillama.com/chain/EthereumClassic
You are right that KYC and whitelisting are not the only way. The easiest way is to pay rewards to informants.

For crypto <-> crypto trades on non-KYC DEXes informants are pretty much useless because traders don't involve any third parties and the traders don't know each other because all traffic is routed via Tor and/or I2P.

Informants can and most likely are already used when trading crypto <-> fiat, because the side that sends fiat must know the recipient's identity to send the fiat. Or they meet in person, which allows easy identification of the two parties involved.

So crypto <-> fiat exchange is pretty much the only weakness of the cryptocurrencies that will be attacked by the governments. Any other limitations that the governments try to impose are mostly smoke and mirrors and I think it is good that the governments waste time and effort of something that will not work.

Any CEX says in the user agreement that they can require KYC and a source of funding from the client and much more. If you have 1-2 thousand dollars there, then there will be no questions until this amount exceeds 10,000 or more.
My friends lost money on such exchanges. They had several thousand and traded for several years. After transferring 20-40 thousand dollars to the exchange, their funds were blocked.

On the second point, I meant that people talk a lot. Even the most famous hackers were let down by their language and lifestyle.

[btcinfo891]

Any CEX says in the user agreement that they can require KYC and a source of funding from the client and much more. If you have 1-2 thousand dollars there, then there will be no questions until this amount exceeds 10,000 or more.
My friends lost money on such exchanges. They had several thousand and traded for several years. After transferring 20-40 thousand dollars to the exchange, their funds were blocked.

That's one of the main inherent deficiencies of CEXes and a major reason for the existence of DEXes. On the other hand DEXes are much slower and have higher fees per one trade. While they are fine for converting one crypto to another or maybe to/from fiat, they are not suitable for trading algorithms that require latency < 10ms or even < 100ms. So I think that the main problem with DEXes is not low liquidity, I used them in a couple of cases and they are fine as long as you are not in a hurry, but they are just too slow and expensive for many trading algorithms.

Anyone who manages to create an exchange that combines the benefits of DEXes and CEXes will make a killing. It could be a low-latency DEX or maybe a no-KYC CEX with some kind of really smart contract that guarantees the user that he would be able to withdraw his funds thus guaranteeing that the CEX won't be able to block the funds and require a KYC. Or maybe some other kind of system that provides the benefits of both kinds of exchanges.

On the second point, I meant that people talk a lot. Even the most famous hackers were let down by their language and lifestyle.

Yeah, not being able to keep one's mouth shut is the main cause of failure in 95% of cases :-)
But joking aside, most people, including those so called "hackers" don't have a deep understanding of computer security and security in general. So they are rather easy to catch and the main reason some of them are able to get away with their petty crimes is that the governments are busy chasing the big fish and the small ones are not paid attention to. Anything related to the banks' electronic money and the governments' CBDCs is trivially traceable by the government. If we add the fact that transactions of most popular cryptocurrencies are publicly visible and we can be sure that for most people crypto does not add any privacy.

[zasad@]

Any CEX says in the user agreement that they can require KYC and a source of funding from the client and much more. If you have 1-2 thousand dollars there, then there will be no questions until this amount exceeds 10,000 or more.
My friends lost money on such exchanges. They had several thousand and traded for several years. After transferring 20-40 thousand dollars to the exchange, their funds were blocked.

That's one of the main inherent deficiencies of CEXes and a major reason for the existence of DEXes. On the other hand DEXes are much slower and have higher fees per one trade. While they are fine for converting one crypto to another or maybe to/from fiat, they are not suitable for trading algorithms that require latency < 10ms or even < 100ms. So I think that the main problem with DEXes is not low liquidity, I used them in a couple of cases and they are fine as long as you are not in a hurry, but they are just too slow and expensive for many trading algorithms.

Anyone who manages to create an exchange that combines the benefits of DEXes and CEXes will make a killing. It could be a low-latency DEX or maybe a no-KYC CEX with some kind of really smart contract that guarantees the user that he would be able to withdraw his funds thus guaranteeing that the CEX won't be able to block the funds and require a KYC. Or maybe some other kind of system that provides the benefits of both kinds of exchanges.

On the second point, I meant that people talk a lot. Even the most famous hackers were let down by their language and lifestyle.

Yeah, not being able to keep one's mouth shut is the main cause of failure in 95% of cases :-)
But joking aside, most people, including those so called "hackers" don't have a deep understanding of computer security and security in general. So they are rather easy to catch and the main reason some of them are able to get away with their petty crimes is that the governments are busy chasing the big fish and the small ones are not paid attention to. Anything related to the banks' electronic money and the governments' CBDCs is trivially traceable by the government. If we add the fact that transactions of most popular cryptocurrencies are publicly visible and we can be sure that for most people crypto does not add any privacy.

I completely agree with you that DEXs are inconvenient for traders in many ways, but there are always greater risks for people who cannot officially verify their income.
A friend of mine has over a million dollars on the exchanges, and his lawyer contacts the VIP manager of the exchange every quarter and provides the exchange with tax returns and all the necessary documents, and even despite this, the trader’s account is blocked several days in a year.