Measuring Asset Composability as a Proxy for DeFi Integration

• URL: http://arxiv.org/abs/2102.04227v2
• Date: Mon, 29 Mar 2021 16:47:15 GMT
• Title: Measuring Asset Composability as a Proxy for DeFi Integration
• Authors: Victor von Wachter, Johannes Rude Jensen, Omri Ross
• Abstract summary: We examine transactions in 'composed' derivatives for the assets DAI, USDC, USDT, ETH and tokenized BTC for the full set of 344.8 million transactions computed in 2020. We identify a salient trend for 'composing' multiple sequential generations of derivatives and comment on potential systemic implications for the network.
• Score: 0.0
• License: http://creativecommons.org/licenses/by/4.0/
• Abstract: Decentralized financial (DeFi) applications on the Ethereum blockchain are highly interoperable because they share a single state in a deterministic computational environment. Stakeholders can deposit claims on assets, referred to as 'liquidity shares', across applications producing effects equivalent to rehypothecation in traditional financial systems. We seek to understand the degree to which this practice may contribute to financial integration on Ethereum by examining transactions in 'composed' derivatives for the assets DAI, USDC, USDT, ETH and tokenized BTC for the full set of 344.8 million Ethereum transactions computed in 2020. We identify a salient trend for 'composing' assets in multiple sequential generations of derivatives and comment on potential systemic implications for the Ethereum network.

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