A Short Survey on Business Models of Decentralized Finance (DeFi) Protocols

Decentralized Finance (DeFi) services are moving traditional financial operations to the Internet of Value (IOV) by exploiting smart contracts, distributed ledgers, and clever heterogeneous transactions among different protocols. The exponential increase of the Total Value Locked (TVL) in DeFi fores...

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Bibliographic Details
Published inarXiv.org
Main Authors Xu, Teng Andrea, Xu, Jiahua
Format Paper Journal Article
LanguageEnglish
Published Ithaca Cornell University Library, arXiv.org 15.07.2023
Subjects
Business competition
Business models
Domains
Finance
Quantitative Finance - Economics
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Summary:Decentralized Finance (DeFi) services are moving traditional financial operations to the Internet of Value (IOV) by exploiting smart contracts, distributed ledgers, and clever heterogeneous transactions among different protocols. The exponential increase of the Total Value Locked (TVL) in DeFi foreshadows a bright future for automated money transfers in a plethora of services. In this short survey paper, we describe the business model for different DeFi domains - namely, Protocols for Loanable Funds (PLFs), Decentralized Exchanges (DEXs), and Yield Aggregators. We claim that the current state of the literature is still unclear how to value thousands of different competitors (tokens) in DeFi. With this work, we abstract the general business model for different DeFi domains and compare them. Finally, we provide open research challenges that will involve heterogeneous domains such as economics, finance, and computer science.
ISSN:2331-8422
DOI:10.48550/arxiv.2202.07742