‘DeFi may lead to a paradigm shift’ says Federal Reserve Bank paper
May 5, 2021. Summarized by summa-bot.
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A Federal reserve research paper has highlighted Ethereum’s role in DeFi and hinted at much bigger things to come.
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.
Dr. Schär explained that the backbone of the entire DeFi ecosystem is smart contracts, the majority of which run on Ethereum.
“The spectacular growth of these assets alongside some truly innovative protocols suggests that DeFi may become relevant in a much broader context and has sparked interest among policymakers, researchers, and financial institutions. ”
According to the ConsenSys Q1 DeFi report, the number of Ethereum addresses interacting with DeFi protocols is at an all-time high of 1. 75 million, following a growth of 10X since the beginning of 2020.