DeFi and the Future of Finance

Description

During the Global Financial Crisis in 2008, our financial infrastructure failed. Govern­ments bailed out the very institutions that let the economy down. This episode spurred a serious rethink of our financial system. Does it make any sense that it takes two days to settle a stock transaction? Why do retailers, operating on razor thin margins, have to pay 3% for every customer credit card swipe? Why does it take two days to transfer money from a bank account to a brokerage—or any other company? Why are savings rates miniscule or negative? Why is it so difficult for entrepreneurs to get financ­ing at traditional banks? In DeFi and the Future of Finance, Campbell R. Harvey, Ashwin Ramachandran and Joey Santoro, introduce the new world of Decen­tralized Finance. The book argues that the current financial landscape is ripe for dis­ruption and we are seeing, in real time, the reinvention of finance. The authors provide the reader with a clear assessment of the problems with the current financial system and how DeFi solves many of these problems. The essence of DeFi is that we interact with peers—there is no brick and mortar and all of the associated costs. Savings and lending are reinvented. Trading takes place with algorithms far re­moved from traditional brokerages. The book conducts a deep dive on some of the most innovative protocols such as Uniswap and Compound. Many of the companies featured in the book you might not have heard of—however, you will in the future. As with any new technology, there are a myriad of risks and the authors carefully catalogue these risks and assess which ones can be successfully mitigated. Ideally suited for people working in any part of the finance industry as well as finan­cial policy makers, DeFi and the Future of Finance gives readers a vision of the future. The world of finance will fundamentally be changed over the coming decade. The book enables you to become part of the disruption – not the target of the disruption. Cover Title Page Copyright Page Contents Foreword Preface Chapter 1 Introduction Five Key Problems of Centralized Financial Systems Implications Chapter 2 The Origins of Modern Decentralized Finance A Brief History of Finance Fintech Bitcoin and Cryptocurrency Ethereum and DeFi Chapter 3 DeFi Infrastructure Blockchain Cryptocurrency The Smart Contract Platform Oracles Stablecoins Decentralized Applications Chapter 4 DeFi Primitives Transactions Fungible Tokens Equity Token Utility Tokens Governance Tokens Non-fungible Tokens NFT Standard Multitoken Standard Custody Supply Adjustment Burn: Reduce Supply Mint: Increase Supply Bonding Curve: Pricing Supply Incentives Staking Rewards Slashing (Staking Penalties) Direct Rewards and Keepers Fees Swap Order-Book Matching Automated Market Makers Collateralized Loans Flash (Uncollateralized) Loans Chapter 5 Problems DeFi Solves Inefficiency Keepers Forking Limited Access Yield Farming Initial DeFi Offering Opacity Smart Contracts Centralized Control Decentralized Autonomous Organization Lack of Interoperability Tokenization Networked Liquidity Chapter 6 DeFi Deep Dive Credit/Lending MakerDAO Compound Aave Decentralized Exchange Uniswap Derivatives Yield Protocol dYdX Synthetix Tokenization Set Protocol Wrapped Bitcoin Chapter 7 Risks Smart Contract Risk Governance Risk Oracle Risk Scaling Risk DEX Risk Custodial Risk Environmetal RISK Regulatory Risk Chapter 8 Conclusions: Losers and Winners Acknowledgment References Glossary Notes Chapter 1 Chapter 2 Chapter 3 Chapter 4 Chapter 6 Chapter 7 Chapter 8 Index EULA