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Abstract
Decentralized Finance (DeFi) services are moving traditional financial operations to the Internet of Value (IOV) by exploiting smart contracts, distributed ledgers, and transactions among different protocols. The exponential increase of the Total Value Locked (TVL) in DeFi foreshadows a bright future for automated money transfers in a plethora of services. In this short survey paper, we describe the business models of various DeFi protocol types—namely,Protocols for Loanable Funds (PLFs),Decentralized Exchanges (DEXs), andYield Aggregators. We then abstract and compare the general business models of those protocol types. Finally, we provide open research challenges that will involve different domains such as economics, finance, and computer science.
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Notes
- 1.
The TVL is commonly defined as the sum of all assets’ value, denominated in USD, deposited in a DeFi protocol, and therefore locked in the underlying set of smart contracts.
- 2.
2021-10-31,https://defipulse.com/.
- 3.
Flash Loans are a special type of loan where the borrower must return the borrowed amount plus interest in the same transaction without the need for collateral. An in-depth explanation can be found in [10].
- 4.
Note that the protocol fee is applied on the swap fee.
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Authors and Affiliations
École Polytechnique Fédérale de Lausanne, Lausanne, Switzerland
Teng Andrea Xu & Jiahua Xu
University College London, London, UK
Jiahua Xu
The DLT Science Foundation, London, UK
Jiahua Xu
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Correspondence toTeng Andrea Xu orJiahua Xu.
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Editors and Affiliations
Georgetown University, Washington, DC, USA
Shin'ichiro Matsuo
Imperial College London, London, UK
Lewis Gudgeon
Cornell University, Ithaca, NY, USA
Ariah Klages-Mundt
Imperial College London, London, UK
Daniel Perez Hernandez
Imperial College London, London, UK
Sam Werner
The Australian National University, Canberra, ACT, Australia
Thomas Haines
Western University, London, ON, Canada
Aleksander Essex
University of Stirling, Stirling, UK
Andrea Bracciali
University of Trento, Trento, Trento, Italy
Massimiliano Sala
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Xu, T.A., Xu, J. (2023). A Short Survey on Business Models of Decentralized Finance (DeFi) Protocols. In: Matsuo, S.,et al. Financial Cryptography and Data Security. FC 2022 International Workshops. FC 2022. Lecture Notes in Computer Science, vol 13412. Springer, Cham. https://doi.org/10.1007/978-3-031-32415-4_13
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