A paper published by the Federal Reserve Bank of St. Louis delves into the expansion of decentralized finance (DeFi) and the role Ether plays in it.
The study, authored by Dr. Fabian Schär and published on May 2, takes a deeper look into the world of DeFi and suggests that it could make a huge difference in the financial industry if security issues and risks can be addressed.
Fabian Schär writes, “DeFi uses smart contracts to create protocols that replicate existing financial services in a more open, interoperable and transparent way.” He also praised DeFi’s efficiency, usability and composability.
“DeFi has the potential to enable a paradigm shift in the financial industry and has the potential to help build a more robust, open and transparent financial infrastructure.”
DeFi’s growth has been tremendous over the past year, with the total locked-in value of the entire ecosystem increasing by 700 percent, according to DefiLlama, a figure that reached an all-time high of approximately $134 billion at the time of this writing.
Dr. Schär explained that the backbone of the entire DeFi ecosystem is smart contracts, most of which run on Ether. The report lists many popular tokens associated with DeFi, but notes that the vast majority are issued on the Ether network.
ETH is also being used as collateral for a large number of DeFi protocols, with 10.5 million ETH locked up (9 percent of the overall supply), according to Defipulse.
Schär, a professor of distributed ledger technology at the University of Basel in Switzerland, said that Ether has set off a wave of innovation based on blockchain technology.
The growth of digital assets such as ETH and the potential of DeFi mean the field is destined for even greater achievements, he added.
“The phenomenal growth of these assets, coupled with some truly innovative protocols, suggests that DeFi has the potential to play a role in the broader environment and is generating interest from policymakers, researchers and financial institutions.”
According to the ConsenSys Q1 DeFi Report, the number of Ether addresses interacting with the DeFi protocol reached 1.75 million, a 10-fold increase since the beginning of 2020.
The study boosted bullish momentum for ethereum, which has outperformed bitcoin this year and rose to an all-time high of just above $3,500 on May 4.
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/federal-reserve-bank-report-defi-could-bring-a-paradigm-shift-to-the-financial-industry/
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