Decentralized Finance (DeFi) is a prominent application of smart contracts, representing a novel financial paradigm in contrast to centralized finance. While DeFi applications are rapidly emerging on mainstream blockchain platforms, their quality varies greatly, presenting numerous challenges, particularly in terms of their governance mechanisms. In this paper, we present a comprehensive study of governance issues in DeFi applications. Initially, we collected 3,165 academic papers and numerous industry reports. After thorough screening, we selected 44 academic papers and 11 industry reports for detailed analysis. Drawing upon insights from industry reports and academic research articles, we develop a taxonomy to categorize these governance issues. We collect and build a dataset of 4,446 audit reports from seventeen Web3 security companies, categorizing their governance issues according to our constructed taxonomy. We conducted a thorough analysis of governance issues and identified vulnerabilities in the governance design and implementation, e.g., voting sybil attack and proposal front-running. Our statistical analysis indicates that a significant portion (35.48%) of governance-related issues is classified as severe. Within these, ownership-related problems constitute the largest share (65.38%). Despite DeFi governance being essential for the long-term success of DeFi projects, our data shows that both auditors and development teams have not fully grasped its significance. Based on audit reports, we also analyzed common vulnerabilities and issues in the governance domain. Our research identifies two primary categories of DeFi governance issues: technology-centric and human-centric. Technology-centric issues can be addressed through technology updates and iterations, whereas human-centric issues are influenced not only by the development team's technical skills but also by their understanding of DeFi governance. Data analysis reveals that design and implementation issues are frequently overlooked; although not directly associated with vulnerabilities, these issues can impact the equitable distribution of project benefits. Furthermore, our analysis of 104 projects’ tokenomics configurations, including 15 collected from DeFi platforms, uncovered 27 inconsistent configurations, with only two projects exhibiting no issues. This suggests that such issues are relatively common. We therefore advise project teams to ensure consistency between their tokenomics design and the actual code. Our study culminates in providing several key practical implications for various DeFi stakeholders, including developers, users, researchers, and regulators, aiming to deepen the understanding of DeFi governance issues and contribute to the robust growth of DeFi systems.
Joshua Tan, Tara Merk, Sarah Hubbard, Eliza R. Oak · 29 authors
Decentralized autonomous organizations (DAOs) are a new, rapidly-growing class of organizations governed by smart contracts. Here we describe how researchers can contribute to the emerging science of DAOs and other digitally-constituted organizations. From granular privacy primitives to mechanism designs to model laws, we identify high-impact problems in the DAO ecosystem where existing gaps might be tackled through a new data set or by applying tools and ideas from existing research fields such as political science, computer science, economics, law, and organizational science. Our recommendations encompass exciting research questions as well as promising business opportunities. We call on the wider research community to join the global effort to invent the next generation of organizations.
Distributed ledger technology and the resulting crypto-assets have the potential to transform the financial and payments industry by leveraging features of flexibility, transparency, and rapid scalability. The constant evolution and increasing adoption of this innovation, despite cyclical turbulence, is here to stay, requiring greater stability and control in order to scale to levels unexpected just a few years ago. The opportunity in the payments industry is to bring innovation particularly in cross-border, micro- and conditional payments, to which current offerings struggle to respond due to rules, technologies, and business models that need to be evolved. To allow this innovation to fulfil its full potential, it is crucial to address the challenge related to the current high levels of risk and uncertainty and to define a clear and shared regulatory framework between national and cross-border regulators. A key role will be played by intermediaries, in particular qualified and reliable service providers, capable of meeting the needs and protecting all parties involved, private and public. They have the opportunity to be key players in the change, driving responsible, sustainable, and inclusive adoption of the innovation that DLT and crypto-assets are bringing. Nexi is at the forefront in supporting a secure and easy transition to a better society, aiming at distributed inclusion and safeguarding both the interests of all private and public stakeholders and regulatory clarity.
Bruno Biais, Agostino Capponi, Lin William Cong, Vishal Gaur · 5 authors
Over the past decade, blockchains and cryptocurrencies have taken a central stage in financial technology (FinTech) innovation. In 2020–2021, as the academic finance and management community began actively investigating this domain, we issued a call for papers for a special issue to encourage interdisciplinary research in this emerging area. This section of Management Science presents the first systematic collection of knowledge, both theoretical and empirical, focusing on blockchain economics, crypto assets, decentralized finance, and Web3 ecosystems. We describe the editorial protocol employed for this special issue (now included in this volume as a special section), summarize what we learn about the field, and introduce the 15 articles included in the special section. We also offer several observations to highlight foundational issues in the new field and to guide future research in this exciting new area at the intersection of technology and finance.
Finansal piyasaların eksiklikleri, merkezi finansal aracı kurumların gerekliliğini ortaya koymuş ve bu kurumlar, müşterilerinin ihtiyaçlarını karşılamada başarılı olmuştur. Ancak hala ülkelerarası para transferi gibi bazı hizmetler için yüksek masraflar ödenmektedir. Ayrıca, çağımızın hızlı ve verimli yeni uygulamalara ve iş modellerine ihtiyacı vardır ve mevcut kurumlar bu gereksinimlere tam olarak yanıt verememektedir. Özellikle COVID-19 ile birlikte dijitalleşmeye geçiş süreci hızlanmış ve finansal piyasalar hızlı bir değişim geçirmiştir. Kripto paralar, yapay zekâ ve blok zincir gibi Web3 bileşenleri, finansal piyasalarda önemli değişikliklere neden olmuş ve merkezi olmayan finansal ekosistemlerin gelişmesine olanak tanımıştır. Bu teknolojik gelişmeler, finansal hizmetlere daha fazla erişim sağlamış ve rekabeti artırmıştır. DeFi merkeziyetsiz finans anlamına gelmektedir ve de merkeziyetli finansa (CeFi)’ye göre birçok üstünlük barındırmaktadır. Kurumsal DeFi ise DeFi ekosisteminin yarattığı ürünlerin finansal kurumlarda kullanılmaya başlanmasını ve kurumların bu sürece uyum sağlayacak teknolojik altyapıyı edinmesini gerektirmektedir. DeFi, şirketlerin varlıklarını dijital tokenlara dönüştürerek bu ekosisteme entegre etmelerine ve finansal işlemlerini merkezi olmayan bir platform üzerinde gerçekleştirmelerine olanak tanır. Bu şekilde işlemler daha hızlı ve düşük maliyetli bir şekilde gerçekleştirilir ve piyasalardaki likidite artar. Bu çalışmanın amacı, DeFi kavramını ve DeFi'nin iş dünyasında nasıl uygulanabileceğini açıklamaktır. Bu çerçevede, DeFi'nin şirketler için potansiyel avantajları ve uygulanması adımları ele alınacak ve finansal kurumların bu dönüşümü başarıyla gerçekleştirmek için göz önünde bulundurmaları gereken faktörler açıklanacaktır. Ayrıca, DeFi'nin kurumsal düzeyde uygulanması sırasında ortaya çıkabilecek riskler ve bu riskleri etkili bir şekilde yönetmek için izlenmesi gereken stratejiler de incelenecektir.
Purpose Using the technology acceptance model (TAM), this study investigates factors influencing the adoption of cryptocurrency in Bangladesh. Design/methodology/approach Data were collected from 346 members of the general public through a structured web survey using snowball sampling. Structural equation modeling was used to analyze the data and assess the reliability and validity of the measurement model. Findings The results show that knowledge of cryptocurrency, benefits of use (perceived usefulness), attitude and challenges all have a significant impact on the adoption of cryptocurrency. Research limitations/implications This study was conducted in a single country, relied on self-reported data and used a cross-sectional design, which limits the ability to draw causal inferences. Future research could explore the factors that influence the adoption of cryptocurrency in different countries and regions and incorporate additional variables to provide a more comprehensive understanding of the drivers of intention to use cryptocurrency. Originality/value This study contributes to understanding the factors driving the adoption of and intention to use technology-based services, providing insights that can inform the design and implementation of future technology-based services.
Understanding the development trajectory of digital platforms is central to digital platform management. We develop a parametric model that investigates the development trajectories of blockchain platforms, accounting for the feedback between blockchains’ utility change and people’s adoption and abandonment behavior. We consider a typical blockchain participant to simultaneously play three roles on the platform, user, investor, and laborer, each contributing to blockchains’ multi-faceted utility: providing service for transaction/interaction, providing a medium for digital investment, and providing workspace for online labor. The model describes a three-phase development trajectory for blockchain platforms: a chaotic initial stage, a rapid growth stage, and a mature stage of stable market cycles. The model was used to match 112 token price series, demonstrating robust performance across different fitting setups and outperforming existing models. The study identifies two temporal parameters, the time delay in quitting the platform and the holding time of the platform’s token, that significantly differentiate blockchains’ development trajectories. We extend the model to study forking events; results suggest that fork launch time is more important than forking amplitude in influencing the main chain’s subsequent development and that forking can increase the exposure of the forked platform.
Smart Contract (SC) Programming Languages (PL) are inspired by Non-SC PLs. Many, like Solidity, use an object-oriented approach with interfaces and inheritance-based sub-typing. However, the main focus of these concepts is on abstraction and extend-ability, whereas for SC Systems, robust, secure and composable SCs are of higher importance. Further, despite supporting inheritance, Solidity and other SC PLs fail to leverage the full benefits of the object-oriented paradigm when multiple SCs are involved. This work presents an approach to SC composability that enables highly composable and secure SCs by encapsulating logic in small traits that serve as interfaces.
Ethereum is being utilized in various ways, including smart contracts and payments. Research in cryptocurrency payments has either been general, about all cryptocurrencies or focused primarily on Bitcoin. Despite some similarities with Bitcoin, Ethereum is a different technology with different governance and support. This research focuses on payments with the Ethereum token, Ether, and puts forward a model of trust in Ethereum payments. Survey data analyzed using structural equation modeling supports the model. Firstly, the model has three variables from the person’s individual characteristics: The user’s predisposition to using innovations in (a) finance and (b) technology, influence (c) their predisposition to trust in this payment process. There are then five variables from the context: (d) Adoption and reputation, (e) stable value and low transaction fees, (f) effective regulation, (g) trust in the payment intermediaries, and (h) trust in the seller. The personal and contextual factors together influence (i) trust in the Ethereum payment process, and this leads to (j) making a payment with Ethereum.
Abstract This chapter highlights the potential impact of the distributed ledger technology (DLT) on over-the-counter (OTC) derivatives markets. The chapter first explains in detail how DLT and/or blockchains work. DLT refers to the novel approach to record and share transactions and/or data across multiple participants in a decentralized way. A blockchain, where data is stored in blocks chained together in a chronological sequence, can then be considered as a particular kind of DLT, albeit the terms ‘blockchain’ and ‘DLT’ are often utilized interchangeably. DLT has received extensive consideration over the past decade from market participants, financial market infrastructures, and regulators. The chapter then documents the current trading life cycle before discussing how DLT could make the existing life cycle more efficient. It will focus not only on the potential advantages of DLT but also on new risks to which this technology might give rise. The chapter ends with regulatory evolutions.
George, Dr.A.Shaji, Dr.S.Sagayarajan, Dr.T.Baskar, A.S.Hovan George
Two-tier ERP systems are an increasingly popular technology strategy for large, multinational enterprises. This paper examines how two-tier ERP enables organizations to balance centralized control and coordination at the corporate level with localized flexibility and responsiveness at the division/subsidiary level. The tier 1 ERP system handles core tasks like HR, finance, and IT using highly customized solutions tailored to the large corporate entity's needs, scale, and sophistication. This promotes enterprise-wide process standardization and centralized control. Meanwhile, the tier 2 ERP systems utilized by smaller subsidiaries and regional offices are less resource intensive and more configurable to address localized requirements. Tier 2 gives local divisions more control over their ERP to enable flexibility and responsiveness. This research analyzes the key drivers pushing large multinationals towards two-tier ERP, including managing complexity across global operations, enabling centralized coordination while allowing localization, integrating dispersed IT infrastructures, and controlling implementation costs. The paper explores the unique characteristics and benefits of tier 1 and tier 2 ERP systems in depth, providing concrete examples. Critical considerations for successfully deploying two-tier ERP are also examined, such as integration, change management, and striking the right balance between standardization and localization. The conclusion reached is that two-tier ERP delivers important synergistic benefits for large enterprises through its centralized/decentralized dual structure. The tier 1/tier 2 approach balances the key needs for coordination and control at the center with flexibility at the edges. However, careful planning is required for effective two-tier ERP implementation. The optimal balance between standardization and localization must be struck to fully realize the strategic potential. This research provides important insights for both academic study and real-world application of two-tier ERP systems.
Stefan Kitzler, Stefano Balietti, Pietro Saggese, Bernhard Haslhofer · 5 authors
We present a study analyzing the voting behavior of contributors, or vested users, in Decentralized Autonomous Organizations (DAOs). We evaluate their involvement in decision-making processes, discovering that in at least 7.54% of all DAOs, contributors, on average, held the necessary majority to control governance decisions. Furthermore, contributors have singularly decided at least one proposal in 20.41% of DAOs. Notably, contributors tend to be centrally positioned within the DAO governance ecosystem, suggesting the presence of inner power circles. Additionally, we observed a tendency for shifts in governance token ownership shortly before governance polls take place in 1202 (14.81%) of 8116 evaluated proposals. Our findings highlight the central role of contributors across a spectrum of DAOs, including Decentralized Finance protocols. Our research also offers important empirical insights pertinent to ongoing regulatory activities aimed at increasing transparency to DAO governance frameworks.
E-commerce is constantly exploring opportunities to streamline payment service integration, particularly in terms of purchase channels and settlement methods. Traditionally, such integrations were provided through bank-acquirers. New initiatives such as Open Banking present a novel approach by offering a centralized gateway for third-party access to banking services. The purpose of this paper is to propose a sample model of a merchant gateway that leverages distributed ledger technology to enable seamless integrations with both purchase and settlement systems. The model holds the potential for accelerating purchase and withdrawal processing but also introduces new challenges that need to be addressed.
In recent years the adoption of smart contracts, in blockchain platforms, has increased substantially. One of the main applications of smart contracts are the so called Decentralized Autonomous Organizations (DAO), which originated from an idea envisaged by Buterin, in his Ethereum white paper. Indeed, DAOs are decentralized organizations, where the members implement their decisions using smart contracts. In the article, we introduce a simple framework for a DAO, and then we discuss some governance issues. In particular, we focus on how DAO members could be induced to dedicate sufficient time to voting sessions, for a proper functioning of the organization. Indeed, recent empirical research suggests how the members’ participation rate, to voting activities, has a meaningful positive correlation with to a DAO's performance. More specifically, we formalize the notion of attention time and propose a simple model for the so-called Holographic Consensus, a protocol introduced by the DAOStack platform to solve the issue of limited time dedicated to governance, discussing under what conditions DAO members may choose the so-called boosting voting procedure.
Presently to achieve enterprise digitalization technologies such as Distributed Ledger Technologies (DLT) has now been deployed to support digital services provided by enterprises. But several challenges in DLTs remain to be addressed, including the interoperability, standardization, and integration. Therefore, this study provides theoretical and practical understanding of DLT interoperability and identified the factors that influence the interoperability of DLTs. Also, an architecture is designed to shows how interoperability can be achieved in DLTs and legacy systems supported by Application Programming Interface (API). A case study is presented to illustrate the applicability of the architecture to support a digital energy marketplace.
Sergio Luis Náñez Alonso, Miguel Ángel Echarte Fernández, Konrad Kolegowicz, David Sanz Bas · 5 authors
Los países de la región del Caribe, Centroamérica y Sudamérica han irrumpido con fuerza e indiscutible liderazgo en la adopción del dinero digital, ya sea apostando por las monedas digitales emitidas y respaldadas por un banco central (CBDC) o por las monedas virtuales descentralizadas (DEFI), lideradas por Bitcoin y Ether. El objetivo del artículo es identificar las razones que llevan a un país o zona monetaria a decantarse por alguno de estos sistemas. Una vez estudiadas las ventajas y desventajas del uso de las divisas virtuales centraremos el análisis en doce variables sobre el uso de dinero móvil extraídas del GFI (Global Findex Indicator) de los años 2011, 2014, 2017 y 2021 de todos estos países. El presente artículo demuestra, entre otras cuestiones, que la apuesta por un dinero digital basado en CBDC o DEFI depende más de la elección política de los dirigentes del país en cuestión que de criterios socioeconómicos.
Purpose Blockchain technology has been recognized as a potential solution to the challenges in managing healthcare information. Its adoption in the healthcare industry has garnered the attention of healthcare institutions and governments. Given the significant role of subsidies in promoting technology adoption, this study applies evolutionary game theory to examine the impact of government subsidies on the adoption of blockchain technology by healthcare institutions. Design/methodology/approach First, the authors analyze the interests of government administration departments and healthcare institutions separately in regards to blockchain adoption. Subsequently, the authors develop the payoff matrix of both participants and construct the evolutionary game model. And then, the authors calculate the replication dynamic equations and analyze the decision evolution of both participants through the replication dynamic equations and numerical experiments. Findings The numerical experiments demonstrate that government subsidies are effective in encouraging healthcare institutions to adopt blockchain technology. The study also reveals the necessary amount of subsidy required to guide healthcare institutions towards adoption. Additionally, the validity of the evolutionary game model in analyzing the interaction between governments and healthcare institutions is confirmed by the results. Originality/value Blockchain adoption in the healthcare industry differs from other emerging technologies, as there is the potential for it to reduce revenue for healthcare institutions. This study contributes to the analysis of theoretical models for promoting blockchain in the healthcare industry through subsidies. Additionally, it demonstrates the potential of evolutionary game theory in analyzing the adoption of blockchain technology, and the interaction between governments and healthcare institutions.
Decentralized Finance (DeFi) marks a transformative shift in financial services, harnessing the power of distributed ledger and smart contract technologies. Despite only five years of development, DeFi has rapidly matured, pioneering state-of-the-art financial products, a stratified ecosystem, and a myriad of innovative vertical and horizontal protocol integrations. Its distinctive characteristics establish DeFi as a crucible for innovation, carrying potential to spur advancements across various service sectors. However, the research community has yet to fully explore this burgeoning field. In this manuscript, we navigate the complexities of this emerging service system, analyzing 362 notable Ethereum-based DeFi initiatives. Our study reveals a robust and dynamic growth trajectory, the advent of a multi-tiered ecosystem, and a sophisticated network of primary market investors. We conclude by highlighting promising avenues for future exploration in DeFi and service system research.
There is a noted rise in research examining the influence of digital transformation-specifically the application of Distributed Ledger Technology (DLT) on the progression of the financial sector.This paper presents conclusions from a study on participants' awareness, understanding, and intentions regarding cryptocurrencies and the Digital Euro.Participants have a relatively high awareness of digital assets and Digital Euro, but better understanding is needed through effective communication and educational initiatives.While recognizing cryptocurrencies as valuable investments, participants are skeptical about their use for payments due to concerns about illicit activities.Regulatory frameworks are deemed important to address these concerns.Participants support the introduction of the Digital Euro and intend to use it for various purposes, suggesting potential demand.Desired characteristics include privacy, ease of use, and cross-border usability.These findings inform the strategies for introducing and accepting the Digital Euro, promoting financial inclusion, and enhancing accessibility in Europe's digital economy.