Discussion Paper
The DeFi Intermediation Chain
Abstract: Decentralized Finance, or DeFi, is a rapidly growing ecosystem of financial applications built on blockchain technology, primarily on the Ethereum network. These applications aim to recreate traditional financial instruments and services, such as lending, borrowing, trading, and insurance. The DeFi intermediation chain connects a series of intermediaries who find arbitrage opportunities, aggregate transactions into blocks, validate these blocks, and ultimately append them to the blockchain. In this post, we summarize results from our staff report describing how arbitrage opportunities arise in the Ethereum blockchain, and how the need to keep these arbitrage opportunities private gives rise to the intermediation chain.
Keywords: financial intermediation; digital assets; intermediation chains;
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Bibliographic Information
Provider: Federal Reserve Bank of New York
Part of Series: Liberty Street Economics
Publication Date: 2024-08-05
Number: 20240805