‘DeFi may lead to a paradigm shift’ says Federal Reserve Bank paper

‘DeFi may lead to a paradigm shift’ says Federal Reserve Bank paper


A paper published by the Federal Reserve Bank of St Louis has delved into the expansion of decentralized finance and Ethereum’s role in it.

The research, penned by Dr. Fabian Schär and published on May 2, has taken a deep dive into the world of DeFi, hinting that if security concerns and risks can be addressed, it may lead to huge changes in the financial industry.

“DeFi uses smart contracts to create protocols that replicate existing financial services in a more open, interoperable, and transparent way,” Dr. Fabian Schär wrote, also hailing its efficiency, accessibility, and composability.

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“DeFi may lead to a paradigm shift in the financial industry and potentially contribute toward a more robust, open, and transparent financial infrastructure.”

DeFi growth over the past year has been monumental, with a 700% increase in the total value locked across the ecosystem. At the time of writing, that figure stands at an all-time high of around $134 billion across different blockchain according to DefiLlama.

Dr.

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