Campbell R. Harvey - DeFi and the Future of Finance

1 COVER

2 TITLE PAGE DeFi and the FUTURE of FINANCE Campbell R. HarveyAshwin RamachandranJoey Santoro

3 COPYRIGHT

4 FOREWORD

5 PREFACE

6 I INTRODUCTION FIVE KEY PROBLEMS OF CENTRALIZED FINANCIAL SYSTEMS IMPLICATIONS NOTES

7 II THE ORIGINS OF MODERN DECENTRALIZED FINANCEA BRIEF HISTORY OF FINANCE FINTECH BITCOIN AND CRYPTOCURRENCY ETHEREUM AND DeFi NOTES

8 III DeFi INFRASTRUCTURE BLOCKCHAIN CRYPTOCURRENCY THE SMART CONTRACT PLATFORM ORACLES STABLECOINS DECENTRALIZED APPLICATIONS NOTES

9 IV DeFi PRIMITIVES TRANSACTIONS FUNGIBLE TOKENS NON-FUNGIBLE TOKENS CUSTODY SUPPLY ADJUSTMENT INCENTIVES SWAP COLLATERALIZED LOANS FLASH (UNCOLLATERALIZED) LOANS NOTES

10 V PROBLEMS DeFi SOLVES INEFFICIENCY LIMITED ACCESS OPACITY CENTRALIZED CONTROL LACK OF INTEROPERABILITY

11 VI DeFi DEEP DIVE CREDIT/LENDING DECENTRALIZED EXCHANGE DERIVATIVES TOKENIZATION NOTES

12 VII RISKS SMART CONTRACT RISK GOVERNANCE RISK ORACLE RISK SCALING RISK DEX RISK CUSTODIAL RISK ENVIRONMENTAL RISK REGULATORY RISK NOTES

13 VIII CONCLUSIONS: LOSERS AND WINNERS NOTE

14 ACKNOWLEDGMENT

15 REFERENCES

16 GLOSSARY

17 INDEX

18 End User License Agreement

1 Chapter 6Table 6.1 The Problems That MakerDAO SolvesTable 6.2 Problems That Compound SolvesTable 6.3 Problems That Aave SolvesTable 6.4 Problems That Uniswap SolvesTable 6.5 Problems That the Yield Protocol SolvesTable 6.6 Problems That dYdX SolvesTable 6.7 Problems That Synthetix SolvesTable 6.8 Problems That Set Protocol Solves

1 Chapter 2 Figure 2.1 Western Union transfer from 1873 Figure 2.2 Iraqi Swiss dinars and new dinars

2 Chapter 4Figure 4.1 Linear bonding curveFigure 4.2 Superlinear bonding curveFigure 4.3 Logistic/sigmoid bonding curveFigure 4.4 Different bonding curves for purchases and salesFigure 4.5 The mechanics of automated market makers

3 Chapter 6Figure 6.1 The Mechanics of MakerDAO's DAIFigure 6.2 Collateralization Ratios in CompoundFigure 6.3 Savings and Lending Rates in CompoundFigure 6.4 The Mechanics of Compound's Equity Token (cToken)Figure 6.5 The Mechanics of an Aave Flash LoanFigure 6.6 The Mechanics of a Uniswap Automated Market MakerFigure 6.7 The Mechanics of a Flash Swap in UniswapFigure 6.8 The Mechanics of Fixed-Rate Borrowing in the Yield ProtocolFigure 6.9 The Mechanics of Arbitrage with dYdXFigure 6.10 Perpetual Futures with dYdXFigure 6.11 The Mechanics of Synthetix

1 Cover

2 Table of Contents

3 Begin Reading

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Campbell R. HarveyAshwin RamachandranJoey Santoro

Copyright © 2021 by Campbell R. Harvey, Ashwin Ramachandran, and Joey Santoro. All rights reserved.

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Published simultaneously in Canada.

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