Decentralized Finance: On Blockchain- and Smart Contract-Based Financial Markets

https://research.stlouisfed.org/publications/review/2021/02/05/decentralized-finance-on-blockchain-and-smart-contract-based-financial-markets

by avyfain • 5 years ago

146 106 5 years ago

research.stlouisfed.org

blhack2• 5 years ago

Where this is going to get really wild: tokenized securities backing the blockchain equivalent of an ETF.

Imagine you program a smart contract which is the frontend of a algorithmic trading system.

That future is coming.

throwaway1777• 5 years ago

That already exists in the form of yield farming.

blhack2• 5 years ago

Not as a frontend for traditional financial instruments as far as I know. Yield farming just trades other crypto asset, doesn't it?

2bluesc• 5 years ago

Kind of close with TokenSets[0] managing Mirror[1] backed assets.

Things like the DeFi Pulse Index[2][3] I believe are automatically re-balanced by evaluating the weights on the third week of the month and then applied the first business day of the following month. I'm not sure if a human is involved?

[0] https://www.tokensets.com/portfolio/dpi

[1] https://mirror.finance/

[2] https://www.tokensets.com/portfolio/dpi

[3] https://www.pulse.inc/

elliotec• 5 years ago

How close is Tzero to what you're talking about? https://www.tzero.com/

slickrick2162• 5 years ago

Check out keeperdao and keepers. They sort of do what you are describing.

paulryanrogers• 5 years ago

Common advice is to only invest in what you understand. If these markets are so obscenely complex only insiders can understand them then doesn't that limit their potential?

suikadayo3• 5 years ago

It'll eventually be abstracted to where it's simple to be used by regular folks, or it'll be integrated into existing infrastructure.

3np3• 5 years ago

Very true, and the same was true for IT companies in the 90s/early 2000s.

Still, I'd say investing in IT stock is accessible for the layman today. Part of this is just that it's early days and we're right now in the midst of a cambrian explosion.

rawtxapp11• 5 years ago

The interface to use MakerDAO (one of the defi projects mentioned) is a lot more straightforward than any bank I've ever used or had to deal with. Sure there are more complicated defi projects, but over time: a) they get more user-friendly, b) users become more educated.

rawtxapp11• 5 years ago

In many ways, the future is here, there are billions of dollars locked in these defi projects, I'd say now it's more about adoption and user education.

xur174• 5 years ago

And scaling. Transaction fees have gotten insane lately, scaling solutions cannot come soon enough.

nugget• 5 years ago

I'm advising a team that is working on this problem right now; it will be a crowded field, but there are multiple distinct approaches. I'd describe the challenge as equal parts technical, legal/regulatory, and marketing/comms. If anyone is interested in potentially working on this or learning more, send me an email.

timdaub• 5 years ago

I'm attempting to build a data set ETF: https://rugpullindex.com

tcgv• 5 years ago

DeFi is a very innovative field indeed. What I find most appealing is that some popular derivative protocols are yet inefficient in some ways, which means there is a lot of room for new solutions to come along.

For instance, I'm interested in options trading, and there is a lot of competing protocols [1] each one with it's advantages and disadvantages. One of the most popular, Hegic [2], employs liquidity pools pricing options at a really expensive value due to a simplified pricing model (good for writers).

Shameless plug: I myself have been playing with smart contracts in my free time and deployed a tokenizable options trading decentralized exchange [3] (on kovan testnet nonetheless!) trying to address some os these points. Learned a lot implmementing it, and I find amazing that anyone can come up with their own DeFi solution.

[1] https://medium.com/coinmonks/an-update-of-a-comparison-of-de...

[2] https://www.hegic.co/

[3] https://github.com/TCGV/DeFiOptions

seibelj3• 5 years ago

This is a great summary, and HNers who knee-jerk hate crypto and say it's worthless should especially give it a read. It's becoming clearer that more and more finance is going to move to blockchain rails. IMO this is the future, and yes I have put my money where my mouth is on that opinion.

udfalkso• 5 years ago

How does one best bet on the future of DeFi?

slickrick2162• 5 years ago

Tricky problem. I’d probably buy some ETH/FTM/DOT to cover speculation on the infra side. Then get some YFI/AAVE/SNX/ROOK to cover the app speculation although there’s hundreds here to choose from.

The approach I’m taking is a blockchain agnostic one. There’s lots of middleware projects with tokens such as GRT, REN and LINK. I see middleware growing really as it has utility in defi but also other applications.

3001• 5 years ago

buy etherum

hanniabu8• 5 years ago

Ethereum (ETH) and DeFi Pulse Index (DPI). Everything is built on Ethereum so the value of the network will be reflected in ETH. There are a few groups working in how to calculate the total value on chain as well as how this value should be related to and reflected in the price. DPI is a basket of DeFi tokens so you'll receive exposure to the big players through asset. You can think of this like an ETF.

rawtxapp11• 5 years ago

Ethereum seems to have the best network effects, developer community and actual capital running on it. If eth2 succeeds, it would probably be the winner, but there are lots of challengers, like polkadot.

You might get yourself some BTC (as a reserve asset for defi), some ETH (as the oil or the machinery which makes the smart contracts go around) and maybe some DOT in case eth2 fails and dot delivers.

p.s. personal opinions, not responsible for losses, etc etc.

3np3• 5 years ago

Unless you feel like really high stakes and/or getting really involved in keeping up with the nitty gritty, go for core infra stuff.

For the past 5 years and the foreseeable short-to midterm. that mainly means ETH (Ethereum), preferably hedged by smaller positions in one or a handful of similarly scoped projects that could end up eating its mind- and marketshare (I won’t judge which are better bets but some candidates would be Polkadot, Cardano, Solana, Tezos. Stay away from EOS and Ripple, there’s nothing behind their curtains)

Other more specific projects mentioned here like LINK, REN, various defi-specific solutions like AAVE/Uniswap, are more perennial and more suited for someone who actually uses these protocols or services, not something I would see as an investment.

ews• 5 years ago

HN (and the horribly named 'intellectual darkweb' to an extend) are sadly becoming 'old man yell at cloud' when talking about crypto. Unfortunately, most of the conversation on btc and DeFi has moved on to subreddits.

3np3• 5 years ago

I've definitely seen a shift here over the past year or so.

Now it seems that threads like this have more comments like yours than actual crypto-bashing comments. I think the tide has turned.

1996• 5 years ago

I think the tide has turned.

Old people eventually retire and die.

But it took BTC to go to 46k for the tide to turn!

And given what I keep noticing every now and then here on HN, the moon seems to control the tide :)

hyko• 5 years ago

It’s possible to both recognise that cryptocurrency is a cool tech and has value, and that it will not become the primary fintech.

A hovercraft is insanely cool tech, and has value, but you’re not driving to work in one.

bromquinn• 5 years ago

This seems to be a great ‘intro to defi’ read.

Can someone with knowledge of defi point out any deficiencies or inaccuracies here? Are there better ‘intro to defi’ papers that newcomers should read?

xvilka3• 5 years ago

Cardano (ADA) looks more promising for the DeFi applications. It's better designed and written in a safer, purer language (Haskell).

suikadayo3• 5 years ago

Cardano doesn't have smart contracts yet, and with Metcalfe's Law and network effects, Ethereum is already leading with DeFi.

xvilka3• 5 years ago

They are almost there with Plutus[1][2] and Marlowe[3].

[1] https://docs.cardano.org/projects/plutus/en/latest/

[2] https://github.com/input-output-hk/plutus

[3] https://docs.cardano.org/en/latest/marlowe/marlowe-explainer...

arberx4• 5 years ago

"It's better designed" - that's a very subjective comment.

There are already a bunch of other chains that do what ADA seeks to do like Tezos, Polkadot, and Solana. Why haven't those gained traction?

Also, while it does make dapps safer, the lack of functional programming experience in most programmers makes it diffcult for me to think Cardano will do any better.

xvilka3• 5 years ago

Polkadot certainly gained traction recently - together with Cardano they occupy 3 and 4 places on market capitalization if you exclude Tether[1].

[1] https://coinmarketcap.com/

vishakh82• 5 years ago

Shameless self-plug on how DeFi can be done more robustly using functional programming constructs: https://vishakh.medium.com/bringing-true-composability-and-r....

arberx4• 5 years ago

I don't think anyone disagrees with this. The reason functional languages aren't used to write smart contracts is the same reason functional languages aren't used to write a majority of software projects...adoptability/lack of knowledge/interest.

arberx4• 5 years ago

Some of the protocols/dapps mentioned in the article that are great entry points into DeFi:

- https://uniswap.org/

- https://aave.com/

- https://makerdao.com/

- https://yearn.finance/

rawtxapp11• 5 years ago

MakerDAO (aka oasis, dai system) is one of the coolest software project I've ever used, highly recommend anyone checking it out.

It's essentially a system of smart contracts and surrounding system which create a stablecoin pegged to the dollar (1DAI=1$) backed by crypto collateral.

One of the benefits of that is, you can access your crypto and use it without selling your position, which means you're not paying any capital gains taxes. There's a 4% stability fee with borrowing against your collateral (notice it's not an interest, it's a fee, which means many people who can't deal or don't want to pay/receive interest can actually use it). 4% is a drop in the bucket when you consider gains on your assets and a lack of capital gains tax.

p.s. I'm a long term BTC believer who always thought most of these projects were scam until I've actually started researching and trying to understand it.

hanniabu8• 5 years ago

always thought most of these projects were scam until I've actually started researching and trying to understand it.

Unfortunately these seems to be the case for most people. What have you this notion that it's all a scam? What it news pundits? Twitter/Reddit threads?

zaarn2• 5 years ago

I love some of these, using them to swap USDC/ETH when I need some more stable tokens. However, the downside at the moment is a high price for transactions on Ethereum, I hope this will get better this year, heard there is some upcoming changes to make transactions cheaper.

mikkelam• 5 years ago

When ETH2 goes live and transaction fees become lower. Centralized exchanges will have a hard time competing with DEX'es like uniswap. Fees are only as high as they are due to gas prices. ETH2 will be a game changer

arberx4• 5 years ago

DEXs can move to L2 in the coming months.

Once a giant like uniswap moves, the rest will follow. Should see transactions fees become a lot lower towards the end of the year.

TameAntelope• 5 years ago

If I wanted to know everything about how these systems worked, where would I begin? Is there anything comprehensive that'd take a while to digest?

seibelj3• 5 years ago

I have considered writing a book about this stuff but it's an insanely bad use of my time vs. building tech in this space from a profit perspective. Defi is the highest possible way that a software engineer can earn money in 2021 without being some high-up FAANG architect or hit the startup lotto. Small teams are making millions or tens of millions of dollars, and they are making actual value (not ICO scams like in 2017!) with billions of dollars flowing through it.

If you want to break into this space, start with the bitcoin white paper, read this book[0], then do the Ethereum white / yellow papers, start messing around with smart contracts, then consume every possible piece of knowledge you can, because it's all spread out everywhere without good central repositories of knowledge.

Defi is protocolized finance. It's making building blocks of financial tools that people and projects fit together in new ways to accomplish various things (earn interest, hedge, go leveraged long, buy insurance, etc. etc. etc.). The possibilities are truly endless and the space is open for innovation like never before as there are no rules and regulations, and there never will be any! Good luck!

[0] https://www.amazon.com/Mastering-Bitcoin-Programming-Open-Bl...

lbotos• 5 years ago

there are no rules and regulations, and there never will be any! Good luck!

https://en.wikipedia.org/wiki/Virtual_currency_law_in_the_Un...

https://www.wired.com/story/janet-yellen-consider-limiting-c...

---

Governments around the world, at any time, could outlaw bitcoin or cryptocurrency. At the moment, it's accepted, but the minute it's seen as 'uncontrollable' expect that regulations will be attempted.

ivanche• 5 years ago

there are no rules and regulations, and there never will be any! Good luck!

Literally the reason why people should stay the hell away from all this. No rules and regulations == Wild West.

postcynical• 5 years ago

Read this and the papers mentioned inside it to get an overview of the market:

https://messari.io/pdf/messari-report-crypto-theses-for-2021...

It might be worth it to get a pro subscription at messari.io or theblockcrypto.com for a saner alternative to crypto twitter and other news outlets.

The quickest way to learn is to actually use it. Make trades on uniswap, earn fees with a liquidity pool, get some sushis, stake them, etc. etc. Unfortunately these days eth gas fees are very expensive though and you will spend a lot of money in fees.

It's nice to read about the history how everything involved and get to know some of the characters behind. Two books i enjoyed: - Bitcoin Billionaires - from the guy who wrote that book from the facebook movie - Out of Ether, how Ethereum got started

hanniabu8• 5 years ago

Uniswap and others will be upgrading to L2 in March so that'll certainly help with the fees.

rawtxapp11• 5 years ago

It would take quite a bit time, but with enough dedication, it's not that difficult. The books: Mastering Bitcoin and Mastering Ethereum (although ethereum one is a bit outdated now) cover a lot of it pretty nicely and you can find them for free on github.

nexthash2• 5 years ago

You will get 10 different contradictory answers because the whole ecosystem is a mess. It's filled with huge amounts of technical complexity, opaqueness, bad actors, and so many gotchas and snafus you didn't forsee that you will be wondering where all the money went. It has no viability and you would be best to stay as far away from it as you can.

hn_throwaway_994• 5 years ago

Apologies if this is a bit of an ELI5 request, but after many years I still don't understand the real-world uses of smart contracts. There was this post on HN a couple years ago, https://news.ycombinator.com/item?id=19225857, and I still don't understand how any of those issues are addressed.

Specifically what I'm struggling to understand is that most (all?) real-world contracts require some information about the real world: The price of corn (or corn futures), whether the rental apartment was as described, whether the sneakers were authentic, etc. But whenever you need this real world information, at some point you need an oracle, or a consensus of oracles, and at that point I don't really see the point of using blockchain as you have to trust the oracles.

Would really appreciate if anybody could provide some info or links that explain how this problem is handled or solved. More importantly, would appreciate a single example of an actual smart contract that responds to events that happen in the real world.

meowkit• 5 years ago

Federated oracles is the answer you are seeking. Essentially build systems to quantify reputation and provide rewards for those that publish data of interest in a manner that can be driven via consensus or through interfacing with an agreed upon central authority prior to a contract. You don’t “trust” the oracles you make them compete and avoid malicious actions.

You are focused on off-chain interactions for smart contracts. The infrastructure is not there yet I’m afraid, but there is steady progress. I believe Taiwan is working on IoT infastructure for publishing high resolution air quality data by having individuals set up sensing nodes that gather the data and publish it. Not sure if there is any DLT involvement, but no reason there couldn’t be.

On chain contracts have lots of use cases in the meantime.

hn_throwaway_994• 5 years ago

On chain contracts have lots of use cases in the meantime.

Thanks for responding. Can you suggest a starting point for learning more about what these use cases are, because I'm still struggling to understand what those would be. When I try searching for things like "uses for smart contracts" I'm pointed to things like this page, https://corporatefinanceinstitute.com/resources/knowledge/de..., which honestly is a bunch of pie-in-the-sky bullshit that is not actually technically feasible at present.

ozorOzora• 5 years ago

I agree. I've been holding BTC for a couple of years as I feel that international accessibility coupled with scarcity makes for a great store of value. But DeFi I still fail to wrap my head around.

My main concern being: DeFi could get harsh competition from traditional financial actors by them getting up to date on accessibility. Thus appealing to a new, more decentralized userbase.

vmception2• 5 years ago

The Automated Market Maker (AMM) systems are smart contracts using something more equivalent to a ballast system with pools - "liquidity pools" (LP, ironically and perfectly these act like limited partner shares of a pooled investment) - allowing the current price to be more of a ratio, which is stored in the smart contract after every trade. The largest AMM's have user-spawned markets which contain two assets (this is in direct contrast and competition to the concept of begging exchanges to add your asset and pretending that market makers organically showed up, all while getting extorted by the exchanges and market makers, the market has chosen AMMs). When someone buys in an AMM market, they send AssetA adding to the pooled balance of AssetA, and receiving AssetB, reducing the pooled balance of AssetB. The ratio (simple division) of these two assets is stored at the end of that trade in the same smart contract (the spawned liquidity pool ballast), and can therefore be read by any other user and other smart contracts. Reading is a free operation.

This user-spawned and self-replication smart contract factory, alongside the price storage, has been key to the DeFi boom over the past year. No oracle required.

People (organizations) are using oracles to try to keep markets with similar assets in sync, and for smarter routing for the best price. The arbitragers take care of that too, which is simply Oracle + Fund movement. Flash loan users in the repo market are arbitraging as well, which is simply Oracle + Borrow + Fund movement + Repay in a single transaction included in a single block.

It is a growth industry when you stop asking why and start asking how. A lot of oracles are ignoring some market pairs, and the oracles themselves could have their own inefficiency.

ur-whale• 5 years ago

real-world contracts require some information about the real world

For a blockchain to know about the real world, it does indeed need so-called "oracles".

These are typically trusted external entities (e.g. an actuarial firm) who "inject" signed information into the blockchain that can then be consumed as input by smart contracts "living" in the blockchain.

For example, an Oracle could inject, say every day, signed with their published key pair, the average price of Bitcoin into the Ethereum blockchain, and you could image a family of smart contract paying out if and only if the oracle-published Bitcoin price meets certain conditions.

This solution is - of course - very far from ideal as the information is only as good as the trust you place in these external institutions.

On the other hand, this is not very different than the trust you place in well established institutions such as banks, rating firms, escrows, etc...

What benefit this brings is:

    1. Transparency (anyone can check the chain to see what contracts are in place)
    2. Automation
    3. Complex hierarchical structures where the "building blocks" or "leaf cells" is provided by the oracles.
    4. A single failure of the Oracle to inject "truth" into the chain would ruin their rep. for ever.

To compare this to a real world contract, one party that has - say - written a "promise to pay" if certain conditions occur could chose to reneg on that promise, which would lead to lengthy and costly legal proceedings.

This latter scenario can't occur on a blockchain: the cheater would have to bribe the Oracle, a far more complicated affair.

[EDIT]: and as pointed out by another comment, there are federated oracles: a smart contract can use an aggregate of multiple sources that provide the same info and form a consensus based on those.

[EDIT2]: another interesting point is that as more and more financial activity "moves" to the blockchain, the need for Oracles diminishes as the information required by a smart contract becomes native. You can thus view oracles as a temporary onramp of legacy financial info into the blockchain.

xoralkindi• 5 years ago

Why do people think cyberspace is not the real world? I think smart-contracts as envisioned by early cypherpunks where meant to run in a world where Governments are obsolete, they won't work well in our current society.

hn_throwaway_994• 5 years ago

This is the kind of "cyber-babble" I'm talking about. Smart contracts can only respond to things that happen on the chain, but the vast majority of events that humans produce contracts to govern in the first place happen in what is colloquially termed "the real world". Yes, I think the blockchain is "real", but I think most people understand what I'm talking about when saying I want a contract to be able to reference actual performance of a service rendered in 3D space.

I think smart-contracts as envisioned by early cypherpunks where meant to run in a world where Governments are obsolete

"Governments" have existed in some form since the beginning of the species (families and tribal structures, etc.) and pretending that some piece of technology may make them "obsolete" belies a very simple understanding of human nature.

roenxi2• 5 years ago

Imagine you are going to hire something expensive, and the owner wants a rental bond. So you go to a 3rd party, they set up a smart contract which automatically returns the bond to you 2 weeks after the lease ends, but the 3rd party can redirect the money to the owner by manually intervening.

The example is basic, but now the 3rd party can't take the money, go broke, take risks using your bond, etc, etc, etc. There is clear-in-code records of what the powers of the parties are and when things happen. You can prove where the money ended up.

This isn't an earth-shattering example, and things can still go wrong. But the failure cases have shrunk vs using paper. It is an improvement on the status quo.

bildung2• 5 years ago

I've done your example in the real world, without smart contracts. The 3rd party is a notary. If I understood you right the notary here is replaced by a notary plus smart contracts.

A notary in my juristication (Germany) is a quasi-employee of the government, so has little risk to go broke etc. The particular bonds for these cases are usually non-transferrable.

OTOH smart contracts introduce new risks like bugs and costs like high gas prices - for what gain?

Edit: To clarify, the modes of failure are vastly worse for the smart contract scenario. If the notary goes broke, my money will not be part of the insolvency estate. If OTOH the smart contract has a bug, everone's money is gone.

hiq• 5 years ago

In Switzerland that's the default for deposits: you create a bank account in your name, but you're not allowed to touch this money until you've left the accommodation and the landlord has agreed that you left it in good shape. I've heard that it's also rather hard for the landlord to claim this money, they need a strong case.

Adrox• 5 years ago

I still don't understand what happens when you actually break something expensive that you hire?

Doesn't some 3rd part have to verify the damage? Doesn't the 2nd part then have to still take a part of the bond?

What if the 2nd part just says you broke something, when you didn't, who solves that?

hn_throwaway_994• 5 years ago

This is an exact example of what I'm talking about, where, in your example, I actually see 0 utility, really negative utility, in using a smart contract.

At the end of the day, this third party escrow service is still the only one that needs to evaluate the performance of services rendered - so where did your "trustless" distributed network go?

I get that the smart contract can ensure that there are only 2 outcomes (money sent or money returned), but it's not like you can remove the legal system here - there is nothing to stop the 3rd party from colluding with one of the other parties to make the decision their way. Heck, even is you still wanted to use crypto, why not just get rid of the smart contract altogether and send the money to the 3rd party's escrow account? You still have a full audit trail so you're guaranteed to know is the 3rd party sent the money somewhere else.

QuesnayJr• 5 years ago

I'm really glad you asked this question, because I've wondered it as well.

nexthash2• 5 years ago

It seems that for years now whenever people try to justify the usefulness of blockchain, cryptocurrencies, and smart contracts there are always 10 different, jargonic, and barely-understandable answers. There is no shortage of excuses given for why they haven't busted banks, credit cards, and payment apps.

For years decentralized technologies have been pushed as the future for the internet and yet they still aren't used by anybody outside hardcore enthusiast communities, while bringing ruin to many others as volatile 'investments'. Goes to show that the problem is in the technology itself, no matter how you present it. Unless it is changed to reflect people's actual needs (i.e: reject the ideology of decentralization for convenience and easy payments) it will never gain traction.

ssss11• 5 years ago

With large financial institutions putting billions into it in 2020 and its continuation in 2021, I think the window for catastrophic failure has gone. Regardless of whether it’s useful or valuable i think it’s here to stay.

iSnow• 5 years ago

The web roughly took from 1995 to 2005 to take off. DLT and DeFi manage value, not just data or customer interactions, the cost of every error can be devastating. Yet, DeFi already has a couple of billions under management which isn't too bad.

I do agree that the fixation on decentralization over everything isn't going to cut it, DLT will be backend tech used to secure hybrid applications. I don't see anyone paying in bitcoin or having an ETH wallet for daily purposes.

birracerveza• 5 years ago

No, it goes to show that you're unwilling to understand new technologies. Your view is jaded, the ecosystem has evolved a lot since 2017 and is starting to see real usage, DeFi being the first of many real world applications to come.

vmception2• 5 years ago

CURRENT GAS PRICES:

1 MATIC GWEI on the MATIC PoS Ethereum sidechain! Rapidly growing liquidity on Quickswap, MATIC PoS Universe 1 has Gas Limits of 30,000,000 GWEI. Restart your higher frequency strategies there!

15 BNB GWEI on the Binance Smart Chain EVM! Rapidly growing liquidity on PancakeSwap and Julswap

These gas prices are equivalent to cents, compared to the hundreds of dollars in gas needed on Ethereum mainnet

The newer AMMs have land grabs for farmers!

dharma1• 5 years ago

This is a really clearly written overview of DeFi, well worth reading over morning coffee no matter if you are new to the space or a veteran.

Shameless plug: I work on the design of one of the protocols mentioned in the paper - https://enzyme.finance / https://twitter.com/enzymefinance - it makes running on-chain funds and strategies very easy. You can create an investment track record, manage outside capital in a trustless and transparent way, create your own active or custom index funds in 2 mins.

We are looking for a frontend dev, and a smart contract dev - DM on Twitter if interested

applepple• 5 years ago

If anyone is interested in a DEX ecosystem which can scale for real (unlike the ones presented in this article) check out https://ldex.trading/ - It's still early so only 1 market for now.

It scales by allowing each market to have separate infrastructure and it executes trades chain-to-chain. It's a natural way to shard the ecosystem based on markets. The degree of decentralization can vary based on the market.

RandomLensman• 5 years ago

I like the idea of making things more "seamless", but what troubles me is how cavalier people are willing to disregard existing knowledge about how to make working markets. For example, CLOBs are not a bad thing and re-inventing price discovery mechanisms is a dangerous thing (I am aware of all the issues in real world markets, but still). Some of these things have many 100s of years of evolutionary refinement in them. As another example, atomic settlement is also not a cure all, as it might up the liquidity requirements (i.e. have cash ready before entering into transactions, which is not how the current world works and it is not clear that this would be better world). The other overlooked item is role of real world law and legal actions, so there is an inherent mechanism to legislate when trust breaks down and that will supersede whatever a smart contract might say. Some points on transparency are also somewhat outdated, regulators now collect vast amounts of data to understand what happened on certain events, where exposures are, how market structure changes and so forth.

eamesyi• 5 years ago

The blockchain that wins will become a global and immutable log for all commercial events. Smart contracts and tokens are but building blocks in a fully on-chain financial system.

https://tokenized.com/docs/intro/preface

Decentralized Finance: On Blockchain- and Smart Contract-Based Financial Markets

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