Maximizing the Time Value of Cryptocurrency in Smart Contracts with Decentralized Money Markets

Tien, Shao-Ku; Wang, Yuting; Cai, Yun-Zhan; Tsai, Meng-Hsun

doi:10.1109/blockchain50366.2020.00073

Cited by 8 publications

(11 citation statements)

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“…Ethereum emerged in 2015 as an alternative to Bitcoin. Ethereum is an infrastructure for implementing smart contracts (Gudgeon et al, 2020), which are contracts with predefined terms and conditions (Dong et al, 2018;Meralli, 2020;Tien et al, 2020), that are selfexecuting and have no need for central organizations (Yang et al, 2020). These characteristics enable information to be shared (Notheisen et al, 2017), facilitating micro transactions (Beck et al, 2018) and reducing the complexity of drafting contracts (Davidson et al, 2016) and hence decreasing information asymmetry and transaction costs.…”

Section: Bitcoin Ethereum and Blockchainmentioning

confidence: 99%

“…Fourthly, there are questions on the issue of single point of failure. As most DeFi projects integrate the same infrastructure into their services, will this create interlinkages that are relevant enough to open the door once more to systemic risks (Tien et al, 2020)? Fifthly are the questions about the balance between algorithms and humans:…”

Section: Q2 What Happens If Defi Applications Become "Too Big" and Wh...mentioning

confidence: 99%

“…This ecosystem of financial applications relies and is built on top of a given public blockchain Kumar et al (2020), often Ethereum, as smart contracts are the fundamental building blocks of DeFi (Gudgeon et al , 2020). Such a DeFi-based alternative financial system involves more decentralization, innovation, interoperability, borderlessness, transparency (Chen and Bellavitis, 2020; Tien et al , 2020), security and integrity (Gudgeon et al , 2020).…”

Section: Theoretical Backgroundmentioning

confidence: 99%

“…These features are even more relevant when dwelling on the nature of a complex network of humans and algorithms, such as a blockchain. As “the operations of decentralized finance tend to rely primarily on the rule of code rather than human judgments” (Chen and Bellavitis, 2020), the review, auditing and formal verification of the coding tend to be even more relevant in DeFi (Tien et al , 2020). However, the answer to who is going to review, audit and verify, should it be a human or another algorithm, is not yet clear.…”

Section: Theoretical Backgroundmentioning

confidence: 99%

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Do we still need financial intermediation? The case of decentralized finance – DeFi

Grassi

Lanfranchi

Faes

et al. 2022

QRAM

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Purpose Decentralized finance (DeFi), enabled by blockchain, could bring about a new financial system, where peers will interact directly, with little or no place for traditional intermediation. However, some crucial tasks cannot be left solely to an algorithm and, consequently, most DeFi applications still require human decisions. The aim of this research is to assess the role of intermediation in the light of DeFi, analysing how humans and algorithms will interact. Design/methodology/approach The authors based their work on a twofold qualitative methodology, first analysing publicly available secondary data, particularly from white papers and DeFi Pulse (a website providing data on DeFi solutions) and then running two focus group discussions. Findings DeFi does not eliminate financial intermediation, but enables it to be performed in new ways, where decentralization means that no single entity can hold too much power or monopoly. DeFi has, however, inherited risks from the underlying technologies that unintentionally facilitate illegal behaviour and can hamper the authorities’ supervision. The complex duality algorithm- vs human-based actions will not be solved indisputably in favour of the former, as DeFi solutions can range from requiring algorithms to play a dominant role, to enabling greater human interaction by actively involving more people. Originality/value This research contributes to the emerging debate between algorithm- and human-based intermediation, especially in relation to the standing literature on financial intermediation, where considerations made in the light of the newest theories on blockchain and DeFi are still scarce.

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Section: Bitcoin Ethereum and Blockchainmentioning

confidence: 99%

Section: Q2 What Happens If Defi Applications Become "Too Big" and Wh...mentioning

confidence: 99%

Section: Theoretical Backgroundmentioning

confidence: 99%

Section: Theoretical Backgroundmentioning

confidence: 99%

See 2 more Smart Citations

Do we still need financial intermediation? The case of decentralized finance – DeFi

Grassi

Lanfranchi

Faes

et al. 2022

QRAM

View full text Add to dashboard Cite

show abstract

“…Hence, Harz et al (2019) present Balance, an incentive-based, dynamic collateral design which they show can reduce overcollateralization by 10% while maintaining the same level of utility and security. Tien et al (2020) implement a solution in which capital locked in smart contracts is supplied to the liquidity pools of Compound, providing an historical average annual percentage yield of 4%. Kim (2021), on the other hand, proposes a loan system in which borrowers can increase collateral utility by betting on price movements of their collateral position; yet acknowledging that the approach requires further research to cope with changed scenarios for forced liquidations.…”

Section: Defi Decentralized Applications (Dapps)mentioning

confidence: 99%