How difficult is it to conduct audits and regulatory reviews in the traditional financial world? Time-consuming, labor-intensive, and full of human variables—a bunch of database records, paper documents, third-party reports. When regulators come to check, you have to scramble to gather and organize the materials.

But in a decentralized financial system, the situation is completely different. Take on-chain stablecoins like USD1 as an example. When regulators ask, "Please prove that at a certain point in time, all issued USD1 are fully collateralized," the answer isn't stored on a company's server or in a paper audit report—it’s on the blockchain.

And anyone can verify it. Regulators, auditors, or even a Python script can independently verify in real-time. Simply retrieve the smart contract state at a specific block height: the total value of assets in all collateral vaults, the total debt of USD1, everything is transparent. Mathematics is honest.

This transparency permeates every detail. How are interest rates set? Check the call history and parameter changes of the rate model contract. Is liquidation fair? Every liquidation transaction is recorded on-chain, including the liquidator's address, discount rate, and debt repayment amount. Are governance decisions compliant? All proposals, voting rights distribution, and voting results are publicly accessible. No room for human interference; code is law, and the execution process is subject to full network oversight.

This is not just a technical feature but a powerful compliant asset. As regulators increasingly scrutinize the crypto ecosystem, projects with "verifiable innocence" will have clear advantages over traditional institutions that rely on trust and reports.