Economic analysis of embedded oversight in decentralized finance

Abstract

Subject. This article discusses the issues related to the oversight of decentralized finance. Objectives. The article aims to search for the optimal conditions for the effective implementation of the embedded supervision of decentralized finance. Methods. For the study, I used retrospective, systems, and functional and structural analyses, classification, comparison, and generalization. Results. The article describes the main problems and ways to solve them in terms of economic analysis of the embedded supervision over decentralized finance. It defines the built-in analysis and optimal conditions for its implementation. The article proposes mathematically determined parameters and recommendations for implementing embedded supervision related to the behavior of nodes and consumption of their register for confirming operations with digital property. Conclusions. The proposed economic and mathematical approaches help formalize the task of embedded supervision in the DeFi environment, and find solutions that take into account the interests of all market participants, as well. The optimization models discussed demonstrate the possibility of balancing the need for transparency and the need to preserve the main benefits of decentralization.