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December 5, 2022
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The Federal Reserve Bank of St Louis has prepared a report on DeFi –

An article published by the Federal Reserve Bank of St Louis is devoted to the expansion of decentralized finance (DeFi) and Ethereum’s role in this process.

The Federal Reserve Bank of St Louis writes about DeFi

The report was prepared by Dr Fabian Schär from the University of Basel in Switzerland and mainly concerns DeFi. In it, the author pointed out that if you can only allay fears and mitigate security risks, it could 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.

As he claims “DeFi can lead to a paradigm shift in the financial industry and potentially create a more robust, open and transparent financial infrastructure.”

The growth of the DeFi market over the past year has been enormous. According to DefiLam, at the time of this writing, we are talking about a value of approximately $ 134 billion that is locked in various blockchains.

DeFi and Ethereum

Dr. Schär explained that the basis of the entire DeFi ecosystem is smart contracts, most of which run on Ethereum. The report lists popular DeFi-related tokens, but notes that the vast majority of tokens are spent on the Ethereum network.

ETH is also used as a collateral for a huge number of DeFi protocols, and 10.5 million ETH, or 9% of the total supply, is blocked in the DeFi market.

Schär, stated that Ethereum unleashed a wave of innovation based on blockchain technology. He added that the rise of digital assets such as ETH and the potential of DeFi mean that the new technology sector is waiting for a key breakthrough:

The spectacular growth of these assets, along with truly innovative protocols, suggests that DeFi could become relevant in a much wider context and has attracted the attention of policymakers, researchers and financial institutions.

According to the ConsenSys report on Q1 this year, the number of addresses in the Ethereum network interacting with DeFi protocols has reached a record high of 1.75 million, after a 10-fold increase since the beginning of 2020.

Today, 1 ETH costs $ 3,234.

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