Blockchain Regulation Matrix
The Blockchain Regulation Matrix (BRM) establishes a framework outlining the concerns of regulating the blockchain from both the government and the consumer perspective, and in doing so, provides a pragmatic and clear approach to Web3 regulation. The BRM outlines regulation aspects of the blockchain by viewing it as a blockchain stack in many layers starting with the electricity physically supporting the blockchain at the base layer, all the way to the process of offloading crypto to fiat currency. With centralization and decentralization on either side of the matrix, the primary objective of the BRM is to understand where and how regulation of the blockchain should be developed specific to each layer.
Beginning with the electricty supporting the blockchain, as you hover over the images of each row, you'll see the specifics for that topic within that layer. The left side refers to projects that are centralized, while the right side refers to projects that are decentralized. For example, if there was an organization or business that wanted to provide electricity to miners in their area, that would be a centralized project. However, if there was a solar farm operating as a DAO that wanted to provide electricity to miners, that could be a decentralized project.
There are two illustrations of the Blockchain Regulation Matrix below, a short-form immediately below and a long-form afterwards.
Hover over the icons to preview each topic, and click any icon to pin its details — the address bar then links straight to that cell, ready to share.
DeFi Architecture Standards / Auditorcentralized
This row applies to creating standards for the DeFi Stack and its Architecture, and for future DeFi Interopability Auditors.
UnaddressedStandards bodies for DeFi architecture don't exist; audit opinions carry no defined liability.
Government Concerns
- No recognized body sets or certifies DeFi interoperability and security standards
- Auditor opinions carry no defined professional liability or accountability
Consumer Risks
- Exposure to unaudited DeFi protocols leading to financial losses
- Lack of transparency in DeFi platform operations
- Potential manipulation through algorithmic biases
- Insufficient due diligence on DeFi projects
Cons to over-regulation
- Imposing high compliance costs for new entrants
- Slowing down DeFi development and iteration
- Potential migration of projects to more permissive jurisdictions
Cons to lack of regulation
- Lack of standardized security practices in DeFi
- Vulnerability to fraudulent schemes targeting users
- Difficulty in resolving cross-border disputes
- Undermining public trust in DeFi
Does blockchain technology currently exist to fulfill these obligations, and if so, what is it?
- Hardened standard implementations (SafeERC20, audited vault standards like ERC-4626)
- EIP-2612 permit signatures replacing risky unlimited approvals
- Security-scoring services publishing comparable protocol review grades
Current regulatory landscape
- guidanceNIST / ISO blockchain standards efforts — US / Global, ongoing. General blockchain standards exist; none yet certify DeFi architecture or auditor competence.
- proposedAuditor Liability framework (draft) — Crypto Policy Center, 2024. This organization's proposal for a professional accountability body — the standards gap this row documents.
Notable incidents
- ERC-777 reentrancy incidents (2020) — A newer token standard's callback hooks enabled reentrancy against integrations built for ERC-20 assumptions — standards interaction as an attack surface.
- Unlimited-approval drains (ongoing) — The default infinite-allowance pattern turns one phished signature into a full wallet drain — a standards-level flaw no single protocol can fix.