The University of Pennsylvania’s Wharton School of Business is consistently considered one of the best business programs in the United States and is the oldest college school of business in the world. In a new report on the Blockchain and Digital Asset Project titled “DeFi Beyond the Hype,” Wharton School staff explain the pros and cons of DeFi and conclude that DeFi has “the potential to be global finance to transform “.
DeFi beyond the hype: an overview
The Wharton Report, in collaboration with the World Economic Forum, provides an excellent high-level overview of the current DeFi landscape. On the first page of the twenty-page report, the team admits that DeFi as we know it is still “early on in. Despite DeFi services growing from under $ 1 billion in 2019 to over $ 80 billion today of maturation “is.
Wharton employees, led by Professor Kevin Werbach, distribute DeFi services in six different silos: stablecoins, exchanges, loans, derivatives, insurance and asset management. The report delves into each of these silos and how DeFi works within them, while still recognizing that the lines between them can at times become blurred. Werbach and his team provide a comprehensive overview of all the important parts of the DeFi machine (wallets, oracles, digital assets, etc.).
The team also outlines four “defining characteristics” of DeFi: commitment to financial services, low-trust operations and settlement (i.e., blockchain integration without permission), non-custodial design, and open, programmable and composable architecture.
Related reading | Top 10 DeFi projects in the second quarter of 2021
Addressing the details
The report takes the time to go into the important details that make DeFi so desirable to some, such as: B. Governance tokens and other incentives that encourage liquidity. It also looks at the costs and benefits of this decentralization and outlines the boundaries between centralized governance, partially decentralized governance, and decentralized governance.
Additionally, the report tries to outline opportunities and challenges in DeFi while being somewhat biased. The possibilities are vast and include aspects such as reduced friction and transaction costs, improved accountability, improved market access and greater inclusiveness of financial services. However, they are not without inherent challenges like throughput, functionality across blockchains (and with traditional services), regulatory issues (especially in the current landscape), and more.
Ethereum has been a focal point in the DeFi landscape. | Source: ETH-USD on TradingView.com
It’s a Wharton wrap
The detailed report summarizes a comprehensive scope of DeFi on twenty pages. Not only does the Wharton team provide a comprehensive view of DeFi, they also take the time to cover protocols like Uniswap and SushiSwap, asset pool protocols like Compound and AAVE, and more.
Wharton (and more and more academic institutions) continue to show and share their view on DeFi and blockchain technology as they evolve. The report aptly states: “Tools are emerging to simplify the user experience with and across DeFi services.”
In conclusion, the report concludes that “DeFi will ultimately be successful or fail depending on whether it can deliver on its promise of financial services that are open, trust-minimized and not safe, but still trustworthy”. It is safe to conclude that there are many who believe DeFi is well on its way to achieving just that.
Related reading | DeFi is facing a radical transformation
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