Today the International Organization of Security Commissions (IOSCO) published a 128-page report with recommendations for the regulation of Decentralized Finance (DeFi). It makes nine recommendations that include analyzing the DeFi protocol, identifying responsible persons and mapping functionality to existing regulated activities. IOSCO is looking for feedback by October 19.
A key feature of using blockchains is the so-called “maximal extractable value” (MEV). Miners or validators can change the ordering of transactions and choose which ones to exclude or include. This sort of conduct is usually illegal in conventional markets, but it is the norm in DeFi.
There are all sorts of ways of benefiting from this reordering, the most obvious being frontrunning. If I know you’re about to place a big buy order, I can place my own buy order before, taking advantage of the price movement triggered by your transaction.
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