Decentralized Finance : The Possibilities of a Blockchain “Money Lego” System

Katona, Tamás János

doi:10.33893/fer.20.1.74102

Cited by 35 publications

(34 citation statements)

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“…If truly decentralized, no single entity (including a DAO's creator) can alter, reverse, or control a DAO once it is deployed on the Internet. A DAO is virtually unregulatable and nonliable: it simply executes its pre-determined set of 'ifthen' rules [2,32]. If a DeFi project delegates management duties to an online community instead of a legal entity, then it is effectively a DAO [1,2].…”

Section: Ethereum's Unregulated Contracts Nonliable Organizations and Centralized Traitsmentioning

confidence: 99%

“…A DAO is virtually unregulatable and nonliable: it simply executes its pre-determined set of 'ifthen' rules [2,32]. If a DeFi project delegates management duties to an online community instead of a legal entity, then it is effectively a DAO [1,2].…”

Section: Ethereum's Unregulated Contracts Nonliable Organizations and Centralized Traitsmentioning

confidence: 99%

“…These projects -commonly categorized as DeFi -include non-custodial cryptoasset exchanges, lending platforms, and derivatives platforms [1]. DeFi projects are often governed by a non-liable DAO rather than a legal entity [2,3]; hence they are distinct from centralized crypto-asset exchanges and lending platforms owned by regulated companies like Coinbase and Celsius.…”

Section: Defi Projects Not Bound To Regulated Companies: Centralized Once Again?mentioning

confidence: 99%

“…Instead of registered shareholders' voting rights, many DeFi projects involve tokenized voting rights, and they offer unregulated financial services that are based on crypto-assets instead of sovereign currencies. For DeFi, the meaning of 'decentralized' thus entails independence from regulated companies, investor registration processes, and central banks [1,2,3]. The descriptor 'decentralized' does not necessarily denote a uniform distribution of capital or voting power [4].…”

Section: Introductionmentioning

confidence: 99%

“…Developers and active members of crypto-asset communities are aware of these tendencies; hence they propose novel, experimental strategies to achieve decentralization. DeFi projects are the most prominent decentralization experiments from late 2020 [2]. Many entail strategies to distribute tradable voting rights tokens (also known as governance tokens) for the sake of political decentralization [1].…”

Section: Introductionmentioning

confidence: 99%

See 4 more Smart Citations

DeFi, Not So Decentralized: The Measured Distribution of Voting Rights

Barbereau¹,

Smethurst²,

Papageorgiou³

et al. 2022

Proceedings of the Annual Hawaii International Conference on System Sciences

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Bitcoin and Ethereum are frequently promoted as decentralized, but developers and academics question their actual decentralization. This motivates further experiments with public permissionless blockchains to achieve decentralization along technical, economic, and political lines. The distribution of tokenized voting rights aims for political decentralization. Tokenized voting rights achieved notoriety within the nascent field of decentralized finance (DeFi) in 2020. As an alternative to centralized crypto-asset exchanges and lending platforms (owned by companies like Coinbase and Celsius), DeFi developers typically create noncustodial projects that are not majority-owned or managed by legal entities. Holders of tokenized voting rights can instead govern DeFi projects. To scrutinize DeFi's distributed governance strategies, we conducted a multiple-case study of non-custodial, Ethereum-based DeFi projects: Uniswap, Maker, SushiSwap, Yearn Finance, and UMA. Our findings are novel and surprising: quantitative evaluations of DeFi's distributed governance strategies reveal a failure to achieve political decentralization.

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Section: Ethereum's Unregulated Contracts Nonliable Organizations and Centralized Traitsmentioning

confidence: 99%

Section: Ethereum's Unregulated Contracts Nonliable Organizations and Centralized Traitsmentioning

confidence: 99%

Section: Defi Projects Not Bound To Regulated Companies: Centralized Once Again?mentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

See 3 more Smart Citations

DeFi, Not So Decentralized: The Measured Distribution of Voting Rights

Barbereau¹,

Smethurst²,

Papageorgiou³

et al. 2022

Proceedings of the Annual Hawaii International Conference on System Sciences

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show abstract

The DLT Pilot Regime and DeFi

Maia,

Vieira dos Santos

2023

Information Technology and Law Series

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A multivocal literature review of decentralized finance: Current knowledge and future research avenues

et al. 2023

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While decentralized finance (DeFi) has the potential to emulate and, indeed, outperform existing financial systems, it remains a complex phenomenon yet to be extensively researched. To make the most of this potential, its practitioners must gain a rigorous understanding of its intricacies, as must information systems (IS) researchers. Against this background, this study uses a multivocal literature review to capture the state of research in DeFi. Thereby, we (1) present a consolidating definition of DeFi as we (2) analyze, synthesize, and discuss the current state of knowledge in the field of DeFi. We do so while adapting the blockchain research framework proposed by (Risius and Spohrer, Business & Information Systems Engineering 59:385–409, 2017). Furthermore, we (3) identify gaps in the literature and indicate future research directions in DeFi. Even though our findings highlight several shortcomings in DeFi that have prevented its widespread adoption, our literature review shows a large consensus on DeFi’s many promising features and potential to complement the traditional financial system. To that end, this paper is presented to encourage further research to mitigate the current risks of DeFi, the payoff of which will be an enriched financial ecosystem.

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Decentralized Finance : The Possibilities of a Blockchain “Money Lego” System

Cited by 35 publications

References 0 publications

DeFi, Not So Decentralized: The Measured Distribution of Voting Rights

DeFi, Not So Decentralized: The Measured Distribution of Voting Rights

The DLT Pilot Regime and DeFi

A multivocal literature review of decentralized finance: Current knowledge and future research avenues

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