Uniswap, which makes no revenue from trades, would need to pay about $15 million per year, according to the same estimation. That is if we assume that 0.25% will stay a constant risk percentage for relatively safe protocols, excluding operational costs. This means, for example, that a protocol like Maker with a TVL of $7.9 billion would need to pay about $20 million per year for its membership fee. Hackers got hold of about 0.25% of DeFi TVL – not revenue – in relatively safe protocols last year.īecause we cannot rely on recovering any of these funds, we must assume that the membership fee would need to be big enough to pay out these losses directly.įurthermore, limiting these losses to a maximum dollar amount cannot be trusted to lower payout requirements because it’s trivial to split investments between addresses. Similarly, small numbers apply to the FDIC, where established institutions with more than five years of insurance under their belt pay between 0.015% to 0.4% of revenue. The SIPC’s Board of Directors decided that 2022’s assessment rate will be 0.0015% of the gross revenue of the member investment firms.
While the SIPC does this at times, it is often not needed since most of the funds are recovered. It’s repaying users with funds from the organization. The most effective method to make up for lost funds from users in DeFi is not litigation. They are also less likely to result in a return of stolen funds. This may not be likely or even possible with DeFi.ĭeFi hacks – especially since last year – are not only more prevalent and more costly – in terms of percentage of the industry. If a broker-dealer loses your securities through insolvency, the SIPC will step in to liquidate their assets and bring legal action against anyone necessary to return as many funds as possible.īoth of these organizations function well to protect consumers against loss in traditional finance – but they’re tailored for that purpose.Īpart from being able to raise funds through charging an assessment rate, which acts like a membership fee or insurance cost for institutions, the majority of their functionality comes from the ability to liquidate assets and take legal action against responsible parties. The SIPC protects user holdings in broker-dealers. A more detailed view of their expenditures in 2021 can be found on their annual report here. That makes a total of $1.9 billion in FDIC operating expenditures. Further, It spent $316 million to manage its deposit insurance fund, and lastly, $303 million was for so-called ‘corporate general and administrative expenditures.’ It spent $227 million on bank failure resolution and receivership management of these resolved funds. About $1.1 billion was spent on that program – thus, making up 58% of its spending in 2021. It also makes sure participating American commercial and savings banks comply with consumer protection laws.
The program is concerned with the examination of banks to assess their operating conditions, management practices and policies, and compliance with applicable laws and regulations.
The FDIC spends much of its budget on its Supervision and Consumer Protection program. If a bank becomes insolvent, the FDIC will preserve or liquidate its assets and begin to pay back customers. The FDIC protects deposits in banks up to certain limits. Would a similar organization work in DeFi? In the US, government-supported organizations protect most traditional finance users by providing a sort of insurance on their deposits.Īmong other things, these organizations protect funds in registered Institutions from being lost through insolvency or due to bank failures.
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