The document, published by the Federal Reserve Bank of St. Louis, deepened the spread of decentralized finance and the role of Ethereum in it.
The study, written by Dr. Fabian Scheer and published on May 2, addresses the DeFi world, suggesting that if security concerns and risks are addressed, it could lead to major changes in the financial industry.
“DeFi is using smart contracts to create protocols that duplicate existing financial services in a more open, interoperable and transparent way,” wrote Dr. Fabian Scheer, praising efficiency, affordability and compliance.
“DeFi could lead to a paradigm shift in the financial industry and possibly contribute to a more reliable, open and transparent financial infrastructure.”
DeFi’s growth over the past year has been phenomenal, with a 700% increase in total value, limited by the ecosystem. At the time of writing, according to DefiLlama, that number is around $ 134 billion across various blockchains.
Dr. Sher explained that the backbone of the entire DeFi ecosystem is smart contracts, most of which run on Ethereum. The report lists a number of DeFi-related tokens, but indicates that the vast majority of tokens are issued on the Ethereum network.
ETH is also used as collateral for a large number of DeFi protocols, and according to Defipulse, 10.5 million ETH, or 9% of the total supply, is blocked.
Cher, a professor of distributed ledger technology at the University of Basel in Switzerland, said Ethereum has launched a wave of blockchain-based innovation.
He added that the rise of digital assets like ETH and the potential for DeFi means the sector is focused on more important things:
“The astounding growth in these assets, along with some truly innovative protocols, indicates that DeFi may become relevant in a much broader context and has generated interest from policymakers, researchers and financial institutions.”
According to the DeFi report from ConsenSys for the first quarter, the number of Ethereum addresses interacting with DeFi protocols reached 1.75 million after a 10x growth since the beginning of 2020.
The study amplifies Ethereum’s bullish momentum, which has overtaken Bitcoin this year and pushed it to an all-time high of just over $ 3,500 on May 4.