St. Louis Fed - Decentralized Finance: On Blockchain- and Smart Contract-Based Financial Markets (company, interest)

[Ken_N]

Good paper from the St. Louis FRB research department.

A good overview of what’s happening...

https://research.stlouisfed.org/publ...ancial-markets

The term decentralized finance (DeFi) refers to an alternative financial infrastructure built on top of the Ethereum blockchain. DeFi uses smart contracts to create protocols that replicate existing financial services in a more open, interoperable, and transparent way. This article highlights opportunities and potential risks of the DeFi ecosystem. I propose a multi-layered framework to analyze the implicit architecture and the various DeFi building blocks, including token standards, decentralized exchanges, decentralized debt markets, blockchain derivatives, and on-chain asset management protocols. I conclude that DeFi still is a niche market with certain risks but that it also has interesting properties in terms of efficiency, transparency, accessibility, and composability. As such, DeFi may potentially contribute to a more robust and transparent financial infrastructure.

[hilgi]

They give a pretty decent description but it is well beyond just Ethereum.

[JeanMilburn]

Great

[Ken_N]

Another good paper on DeFi from ING. It’s worth reading the description of Aave in section 4 to get a sense of what is possible now as a useful service.

When you read about Aave remember that all of this functionality is being implemented by code (aka smart contracts) running on the Ethereum blockchain. There is no company infrastructure, they didn’t create their own server farm or rent cloud space, they don’t need failover or backup recovery sites. These programs are also guaranteed to run, you cannot stop this service from running. You cannot stop someone from interacting with this service, no permission is needed or possible.

https://new.ingwb.com/binaries/conte...paper_v2.0.pdf

Lessons Learned from Decentralised Finance (DeFi)
X. Meegan, T. Koens
ING
blockchain@ing.com

Abstract.

On a global scale blockchain and Distributed Ledger Tech- nology are deployed to transform existing centralised financial services. The purported divide between centralised and decentralised financial ser- vices could lead to the discrimination of either service.

In this white paper we analyse the properties of DeFi and provide lessons learned for both centralised as well decentralised financial services. Based on our analysis and the lessons learned we conclude that the best of both worlds is achieved if centralised and decentralised financial services cooperate.