The article highlights the dynamic processes associated with cryptocurrencies and asset tokenization, highlighting their impact on the world of economics. Attention is focused on the role of digital finance in the renewal of global markets, including changing investment approaches and the formation of innovative business structures. The advantages of using block-chain are considered – from transparency of financial transactions to reduction of transaction costs due to decentralization. At the same time, the difficulties that modern cryptoeconomics faces, including regulatory, risky and legal aspects, are outlined. Tokenization, as the process of identifying an isolated asset in the form of a digital token, is highlighted as a promising area that promotes greater accessibility to investments and simplifies asset management. Special attention is paid to the practical application of tokenization in various sectors, from real estate to art and the stock market, as well as its potential to attract venture capital. The article also examines the integration of digital technologies into established economic processes and assesses their future impact on the financial systems of the world. The importance of cryptocurrencies and tokenized assets in creating a new economic environment that stimulates the progress of digitalization and access to financial markets was emphasized. In conclusion, the article concludes that it is urgent to develop a harmonious regulatory policy and establish international standards designed to ensure the stability and security of the digital economic space in the era of its active growth.
This paper introduces a novel framework for rate discovery in de-centralized finance (DeFi), focusing on the unique challenges andopportunities within decentralized lending platforms. We explorethe mechanisms of interest rate formation in a decentralized en-vironment, free from traditional banking institutions’ control. Byleveraging lending pool dynamics, we propose a method that inte-grates borrowers’ risk profiles with market liquidity conditions todetermine fair borrowing rates without third party involvment. Ourmodel aims to offer a transparent and reliable solution for rate dis-covery in DeFi. Through a series of simulations, we demonstratethe potential of our framework to improve lending practices in theDeFi ecosystem, making it a viable and competitive alternative toconventional financial systems. The findings suggest that our ap-proach not only enhances the transparency and fairness of the lend-ing process but also encourages a more informed participation oflenders and borrowers, ultimately contributing to the stability andgrowth of the DeFi market.
This study investigated the de-pegging effect of stable coins in the crypto market considering the increased growth in crypto lending using DeFi (Decentralized Finance).Employing an event study method and using the trading data of a select sample of stable coins and cryptocurrencies in more than two-year post-pandemic sample period (01 January 2021-30 March 2024), the study examined whether there was a spillover effect of stable coin crisis into the cryptocurrency market.The event study results showed that prior to the de-pegging event, there was a sharp decline in abnormal returns of both stable coins and cryptocurrencies.The univariate, event study and logistic regression estimations support the study predictions that the de-pegging event of USDC affected the crypto market adversely including the cryptocurrencies.Despite the claim of maintaining a pegged value, the stable coins were found to be prone to volatility mainly due to their involvement in DeFi lending.Although both USDC and DAI recovered fast and reached their pegged values of US$1, probably due to the immediate intervention of the FED in the March 2023 banking crisis, the recovery was short-lived.This is a lesson for crypto investors who patronize DeFi lending platforms in pursuit of yield farming and staking that stable coins are no longer stable as they claim to be, and they can be as volatile as cryptocurrencies.
ABSTRACT Using comprehensive transaction level loan data for the MakerDAO protocol (2019–2023), this study investigates decentralized finance (DeFi) lending dynamics, focusing on the deter- minants of loan demand and the interplay between leverage, skill, and user performance. We document a counterintuitive positive relationship between the cost of borrowing and loan demand, consistent with yield seeking behavior. Moreover, blockchain- and protocol-specific frictions, such as gas fees shape borrowing activity. At the vault level, leverage universally reduces returns and amplifies liquidation risk, with unskilled users incurring significantly greater losses than skilled counterparts under extreme leverage. While skilled users mitigate moderate leverage risks through active management, excessive leverage erodes performance across all skill levels, with forced liquidations accounting for a significant proportion of this decline. The findings reveal critical trade-offs in DeFi permissionless architecture. While skilled participants exploit leverage strategically, systemic design features disproportionately penalize less sophisticated users.
The measurement of the velocity of money is still a significant topic. In this paper, we proposed a method to calculate the velocity of money by combining the holding-time distribution and lifespan distribution. By derivation, the velocity of money equals the holding-time distribution's value at zero. When we have much holding-time data, this problem can be converted to a regression problem. After a numeric simulation, we find that the calculating accuracy is high even if we used only a small part of the holding time data, which implies a potential application in measuring the velocity of money in reality, such as digital money. We also tested the methods on Cardano and found that the method can also provide a reasonable estimation of velocity in some cases.
Decentralized Finance (DeFi) has reshaped the possibilities of reserve banking in the form of the Collateralized Debt Position (CDP). Key to the safety of CDPs is the money supply architecture that enables issued debt to maintain its value. In traditional markets, and with respect to the United States Dollar system, interest rates are set by the Federal Reserve in an attempt to influence the effects of excessive inflation. DeFi enables a more transparent approach that typically relies on interest rates or other debt recovery mechanisms being directly informed by asset price. This research investigates contemporary DeFi money supply and debt management strategies and their limitations. Furthermore, this paper introduces a time-weighted approach to interest rate management that implements a Proportional-Integral-Derivative control system to constantly adapt to market activities and protect the value of issued currency, while addressing observed limitations.
Since 2009, the process of creating virtual financial assets, in particular bitcoin, has been taking place in Ukraine, as in many countries of the world, and the scale of this activity is growing almost exponentially. The lack of state regulation creates the problem of lack of accounting and control of those negative effects on ecology and economy that arise in the process of creating virtual financial assets, i.e. mining. The work analyzes the findings of domestic and foreign scientists regarding the risks inherent in the creation of virtual financial assets, the main of which are the significant consumption of electricity produced from non-renewable sources, carbon and heat emissions, the use of clean water and the creation of electronic waste. Three stages in mining activity are defined and the problems of risk reduction inherent in each stage are defined. The first stage is decisive in terms of preventive actions regarding the risks that will arise in the next stage. At this stage, it is necessary to decide on the location of the equipment, the type of equipment that will be used in the mining process. In our opinion, providing mining with a unique code in KVED and introducing licensing of the specified activity are mandatory actions of the state on the way to reducing the risks associated with the creation of virtual financial assets. Licensing conditions must contain requirements for minimum energy efficiency, setting limits on the use of electricity and Internet traffic, and obligations regarding the safe disposal of electronic waste. At the second stage, it is important to choose the Proof-of-Stake consensus mechanism, which will allow you to save electricity. The third stage involves providing information on the type and amount of resources that were used during mining, as well as on the amount of carbon and heat emissions, during the release of the created assets to the market. This will enable investors to make informed decisions taking into account their attitude to environmental safety. The need for active actions by the state regarding the recognition of mining as a separate type of activity with its inclusion in the KVED and the introduction of licensing with the inclusion of requirements for reducing risks in miners’ activities in the licensing conditions is substantiated.
The rapid growth of crypto assets raises important questions about their cross-border usage. To gain a better understanding of cross-border Bitcoin flows, we use raw data covering both on-chain (on the Bitcoin blockchain) and off-chain (outside the Bitcoin blockchain) transactions globally. We provide a detailed description of available methodologies and datasets, and discuss the crucial assumptions behind the quantification of cross-border flows. We then present novel stylized facts about Bitcoin cross-border flows and study their global and domestic drivers. Bitcoin cross-border flows respond differently than capital flows to traditional drivers of capital flows, and differences appear between on-chain and off-chain Bitcoin cross-border flows. Off-chain cross-border flows seem correlated with incentives to avoid capital flow restrictions.
Geleneksel olarak fiziki senetlere bağlanan menkul kıymetler daha sonra teknolojinin gelişmesi ve piyasa ihtiyaçlarının değişmesiyle birlikte merkezi saklama sistemiyle aracılı bir şekilde saklanmaya başlanmıştır. Geleneksel saklama sisteminde söz konusu olan hak sahibi ile ihraççı arasındaki doğrudan bağlantı merkezi saklama sisteminde araya aracıların girmesi sebebiyle kesilmiştir. Merkezi saklama sisteminde, merkezi saklama kuruluşu nezdinde hak sahibi bazında izlenmeyen havuz hesaplar açılması yoluyla oluşan toplu ve misli saklama yöntemi, hak sahiplerinin menkul kıymetlerinden kaynaklanan haklarını kullanırken ihraççıya karşı kendilerinin mi yoksa aracı zincirinin en tepesinde olan aracının mı yasal hakka sahip olduğu noktasında sorunlara sebep olmaktadır. Bu nedenle özellikle milletlerarası sermaye piyasası işlemlerinde yabancı yatırımcıların kurumsal yönetime katılımları düşmektedir. Günümüzde ise teknolojinin gelişmesiyle birlikte menkul kıymetlerin dağıtık defter teknolojisi vasıtasıyla saklanması gündemdedir. Dağıtık defter teknolojisinin özellikleri nedeniyle bu yöntemde hak sahibi ile ihraççı arasında tıpkı geleneksel saklama yönteminde olduğu gibi yeniden doğrudan sahiplik sistemi söz konusu olmaktadır. Çalışmamızda menkul kıymetlerin dağıtık defter teknolojisiyle saklanmasının merkezi saklama sisteminin ortaya çıkardığı sorunlara çözüm getirip getirmeyeceği incelenmektedir.
Creditcoin 3.0 is the next evolution of the Creditcoin blockchain evolving from a specialized blockchain to record loan transactions into a more generic chain targeting real-world asset management. It is a fully EVM-compatible Layer 1 blockchain. In other words, it supports smart-contract development and is compatible with many popular tools used in the Ethereum ecosystem, for example, wallet apps and smart-contract development tools. Creditcoin 3.0 is built with the Substrate framework adding a special EVM compatibility layer on top of it and uses the nominated-proof-of-stake consensus algorithm like its predecessor.
Creditcoin 2.3 (technical version number), publicly also referred to as Creditcoin 2.0+ (2.0 plus), is the next significant release in the Creditcoin 2.x family. It is a natural successor of v2.0 and builds upon the existing implementation. The most noticeable change is the switch from a proof-of-work to a nominated proof-of-stake (NPoS) consensus algorithm.
This paper considers the "DeFi intermediation chain"-the market structure that underlies the creation and distribution of ETH, the native cryptocurrency of Ethereum-to examine how information asymmetry shapes intermediation rents.We argue that using proof-of-stake blockchain technology in DeFi leads to a novel limit to arbitrage, arising from the tension between arbitrageurs' privacy needs and blockchain transparency.Using a new dataset which distinguishes private and public transactions in Ethereum, we find that a 1% increase in private information advantage leads to a 1.4% increase in intermediaries' profit share.We develop a dynamic bargaining model that predicts information market power stems exclusively from participants' private information advantage.Our analysis illustrates how blockchain technology can sustain arbitrage opportunities despite low entry barriers.