Vega Research
Quantifying economic impact of decentralised financial systems
GitHub issue: #5
Description
While decentralised finance is still in its infancy, there are interesting questions regarding the quantity and nature of the systemic shifts that these systems have the potential to facilitate. For example, by lowering the cost and ease of access to financial markets, will there be significantly greater adoption of financial products (i.e. growing the pie globally)? Where and how is that likely to occur? This Bloomberg study showed that only 5% of businesses in Africa use derivatives to hedge business risk compared to almost 80% of those in the UK.
The below spreadsheet is (the start of) an overview of how Vega’s design compares to the operation of traditional markets and centralised exchanges, including attempting to capture the cost and efficiency gains. To build on this, it would be interesting to model the potential costs for each part of the traditional system that DeFi protocols have the potential to upend (i.e. the cost of intermediaries and gatekeepers).
https://docs.google.com/spreadsheets/d/1uiGYtemTR5nhZ2p7NUb2MTx9EGaw2lVpAu8AXe8qF90/edit#gid=2000036156