In a detailed and fascinating paper on the topic Dirk Zetsche, Douglas Arner and Ross Buckley summarise the opportunity very accurately by noting that defi potentially offers an opportunity for the development of an entirely new way to design regulation, specifically with the concepts of “embedded supervision” and “embedded regulation” (or as Richard Brown, Salome Parulava and I called it “ambient accountability”) potentially decentralizing both finance and its regulation in the ultimate expression of not fintech but regtech.
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DeFi may increase the efficiency, transparency, and accessibility of the financial infrastructure. Moreover, the system’s composability allows anyone to combine multiple applications and protocols, thereby creating new and exciting services.
Decentralized Finance: On Blockchain- and Smart Contract-Based Financial Markets | St. Louis Fed:
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Building these structured products on DeFi offer a unique opportunity. Instead of having institutions construct these complicated payout structures, can smart contracts act as your broker? The contracts can source liquidity from various on-chain derivatives protocols, compose them together to achieve some specific risk objective, while staying 100% transparent at all times.
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Snippings 