How Does the Concept of “Fiduciary Duty” Apply in Decentralized Finance?

The concept of fiduciary duty, a legal obligation to act in another party's best interest, does not directly apply in most of decentralized finance (DeFi). DeFi protocols are typically non-custodial and governed by immutable smart contracts, operating without traditional intermediaries like brokers.

Users interact with code directly, and there is no legal entity that owes them a duty of care in the traditional sense. This absence is a key reason why activities like front-running, which would be illegal in traditional finance, are often permissible in DeFi.