St. Louis Federal Reserve, a branch of the United States’ central bank recently published a paper on their website. The paper included the term “DeFi” that was regarding Decentralized Finance. The paper was written by a professor of the University of Bases, Fabian Schar. He is the one who focuses on blockchain and DeFi. He is also a member of the Center for Innovative Finance, a University focused on FinTech.
The Paper States…
In the paper, Fabian stated that DeFi may lead to a “paradigm shift in the financial industry.” In the conclusion, the paper explained that while DeFi is still small when compared to financial services, it offers various benefits in terms of “efficiency” and other entities of the financial system:
“I conclude that DeFi still is a niche market with certain risks but that it also has interesting properties in terms of efficiency, transparency, accessibility, and composability. As such, DeFi may potentially contribute to a more robust and transparent financial infrastructure.”
The paper also mentioned how Ethereum smart contracts are composable, the way they work together to unlock key innovations and benefits. Furthermore, the paper also outlined the key components of how Uniswap, MakerDAO, Aave, and other decentralized protocols work and why they are better than centralized services.
Many reacted to the paper in a bullish sentiment out of which, Fred Ehrsam, who is the co-founder of Paradigm reacted saying that, “you can’t make this stuff up”.
Although the Federal Reserve Branch shared this paper, it isn’t a firm endorsement of the sentiment, instead, the branch hosted this discussion.
The paper is an indication that decentralized finance has become stronger than ever before. Michael Novogratz who is the founder of Galaxy Digital said that the GameStop short squeeze by retail investors against Wall Street signifies the value of DeFi:
“1) This GME squeeze is deeper than a squeeze. it’s a large group of people saying they don’t want Citadel preying on their orders from RH, they don’t want IPO’s being allocated to insiders, they don’t like a system geared to the already rich. This is a giant endorsement of DEFI.”
Mark Cuban who is the billionaire owner of the Dallas Mavericks, has begun to fiddle in response to the Gamestop event and other trends.