The journal is a top tier peer-reviewed academic and practitioner journal that publishes high-quality articles with a focus on digital finance and innovation as well as on the analysis of digital and internet innovations on financial services and the economy. The journal publishes theoretical or empirical, qualitative or quantitative papers of interest to academics, practitioners, and regulators with the emphasis on empirical, financial market, and investment innovation, financial policy research and recommendations related to improving the welfare in the digital economy.
About the Special Issue
Link to the special issue: https://www.springer.com/journal/42521/updates/20051576
Decentralized Finance (DeFi) describes open financial systems on distributed ledgers that do not require trust in intermediaries. Processes formerly offered by centralized intermediaries (e.g. banks or brokers) are replaced by decentralized protocols in the form of smart contracts (Ante, 2021; Chen and Bellavitis, 2020).
DeFi shifts governance, empowerment, participation, but also risks between stakeholders. It consists of a multi-layered architecture, which builds on base layer settlement infrastructures most often in the form of blockchains, such as Ethereum, Solana, Avalanche, Fantom or Polygon. On top of that, additional layers exist for protocols, assets, applications and aggregation (Schär, 2021).
The DeFi market has grown exponentially since 2020 and continues to generate a steady stream of new innovations, decentralized applications (dApps) and business models. Decentralized protocols in the form of smart contracts autonomously manage crypto-assets worth over a hundred billion dollars and enable applications such as lending (Bartoletti et al., 2021a), trading (Angeris, 2019; Neuder et al., 2021) or asset management (e.g., popsicle.finance). The fast pace of the DeFi environment represents both a challenge and an opportunity for academia. While DeFi markets evolve at rapid pace and thus hard to track, they are fully transparent and thus produce enormous quantities of (“on-chain”) data from many sources and in a variety of formats. This offers a promising basis for empirical research.
The concept of tokenization has spawned a variety of digital tokens, crypto-assets and protocols that populate the DeFi ecosystem. One type of digital token and a major aspect of DeFi markets are stablecoins, digital tokens that peg their value to an underlying asset. Exemplary stablecoin-related research includes price processes and arbitrage (Pernice, 2021), issuances (Griffin and Shams, 2020; Ante et al., 2021a), transfers (Ante et al., 2021b) or the stability of stablecoin prices (Hoang and Baur, 2021). Further phenomena of the DeFi market are digital tokens sales, digital reserve currencies, non-fungible tokens (NFTs), so-called “meme coins”, security tokens, fan tokens (e.g., of sport clubs), governance tokens or decentralized autonomous organizations (DAOs).
Decentralized exchanges (DEXes) and automated market makers (AMMs) (Bartoletti et al., 2021b), like Uniswap v3 (Neuder et al., 2021) or Sushiswap have developed into major trading protocols with billions in trading volumes. They allow DeFi users to trade tokens directly from their wallet and without a central counterparty. This has resulted in a plethora of challenges, potentials and possibilities to be studied by academia. This includes, for example, the challenge of impermanent loss (IL) (Aigner and Dhaliwal, 2021), the economics of cross-listings (Meyer and Ante, 2020), flash loans (Qin et al., 2021a, 2021b), high-frequency trading (Zhou et al., 2021), miner extractable value (MEV) (Daian et al., 2020), rebalancing of capital, hedging of liquidity provider positions, profitability assessment or capital allocation strategies. Further phenomena of the DeFi market are, for example, lending, aggregation or derivative protocols.
Objective and topics:
For this Special Issue, we invite rigorous and timely theoretical, empirical, qualitative or quantitative research that develops a better understanding of DeFi as a phenomenon, its market(s), protocols, assets and applications. Most importantly, we are focused on innovative research that will analyze past trends and events to sharpen our understanding of the evolving role of the DeFi ecosystem. The sensible and thoughtful growth of DeFi is integral to the liberalization and democratization of financial markets and their governance. Therefore, we support studies that will generate practical and theoretical implications.
To this end, and in line with the aim and scope of the journal, we are interested in high-quality submissions that embrace diverse methodological approaches and theoretical frameworks, employ rich new datasets covering different DeFi layers, protocols, assets and applications, or investigate the role of DeFi more broadly.
The following are some select, non-comprehensive examples of possible research topics:
- Crypto-assets (e.g., cryptocurrencies, stablecoins, non-fungible tokens (NFTs), meme coins, fan tokens, security tokens, central bank digital currency (CBDC), etc.)
- Decentralized exchanges (DEXes) and automated market makers (AMMs)
- DeFi protocols (e.g., lending, staking, governance, bridging, spot trading, derivatives, insurance etc.)
- Optimization, aggregation and strategic asset allocation in DeFi markets (e.g., yield farming, liquidity provision, Uniswap v3 price ranges, arbitrage, efficiency of aggregation protocols such as 1inch, Matcha or CowSwap)
- Adoption, psychology, perception and understanding of cryptocurrency, blockchain and DeFi
- The role of on-chain data for the market efficiency of crypto-assets and DeFi protocols; new metrics or common risk factors
- Economic analysis of blockchain- or DeFi-specific mechanisms and events (e.g., miner extractable value (MEV), flash loans, sandwich attacks, hacks, exchange listings, airdrops, etc.)
- Governance in DeFi protocols and decentralized autonomous organizations (DAOs) and the role of native protocol tokens
- Implications of cross-chain or layer-2 solutions (e.g., cross-chain arbitrage, relevance of transaction costs for adoption, etc.)
If you are unsure whether your research topic could fit into the special issue or the journal’s scope, please contact the Special Issue’s editor via email.
Editor of the Special Issue:
Lennart Ante, Co-Founder & Researcher, Blockchain Research Lab gGmbH, Germany, email@example.com
Deadline for paper submission: 31 July 2022
- Aigner, A. A., & Dhaliwal, G. (2021). UNISWAP: Impermanent Loss and Risk Profile of a Liquidity Provider. arXiv preprint arXiv:2106.14404.
- Angeris, G., Kao, H. T., Chiang, R., Noyes, C., & Chitra, T. (2019). An analysis of Uniswap markets. arXiv preprint arXiv:1911.03380.
- Ante, L. (2021). Smart contracts on the blockchain – A bibliometric analysis and review. Telematics & Informatics, 57, 101519. https://doi.org/10.1016/j.tele.2020.101519
- Ante, L., Fiedler, I. & Strehle E. (2021a). The influence of stablecoin issuances on cryptocurrency markets. Finance Research Letters, 41, 101867. https://doi.org/10.1016/j.frl.2020.101867
- Ante, L., Fiedler, I. & Strehle, E. (2021b). The impact of transparent money flows: Effects of stablecoin transfers on the returns and trading volume of Bitcoin. Technological Forecasting and Social Change, 170, 120851. https://doi.org/10.1016/j.techfore.2021.120851
- Bartoletti M., Chiang J.H., Lafuente A.L. (2021a) SoK: Lending Pools in Decentralized Finance. In: Bernhard M. et al. (eds) Financial Cryptography and Data Security. FC 2021 International Workshops. FC 2021. Lecture Notes in Computer Science, vol 12676. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-662-63958-0_40
- Bartoletti, M., Chiang, J. H. Y., & Lluch-Lafuente, A. (2021b). A theory of Automated Market Makers in DeFi. In International Conference on Coordination Languages and Models (pp. 168-187). Springer, Cham. https://doi.org/10.1007/978-3-030-78142-2_11
- Chen, Y., & Bellavitis, C. (2020). Blockchain disruption and decentralized finance: The rise of decentralized business models. Journal of Business Venturing Insights, 13, e00151. https://doi.org/10.1016/j.jbvi.2019.e00151
- Daian, P., Goldfeder, S., Kell, T., Li, Y., Zhao, X., Bentov, I., … & Juels, A. (2020). Flash boys 2.0: Frontrunning in decentralized exchanges, miner extractable value, and consensus instability. In 2020 IEEE Symposium on Security and Privacy (SP) (pp. 910-927). IEEE. https://doi.org/10.1109/SP40000.2020.00040
- Griffin, J. M., & Shams, A. (2020). Is Bitcoin really untethered? The Journal of Finance, 75(4), 1913-1964. https://doi.org/10.1111/jofi.12903
- Hoang, L. T. & Baur, D. G. (2021) How stable are stablecoins? The European Journal of Finance, 1949369. https://doi.org/10.1080/1351847X.2021.1949369
- Neuder, M., Rao, R., Moroz, D. J., & Parkes, D. C. (2021). Strategic Liquidity Provision in Uniswap v3. arXiv preprint arXiv:2106.12033.
- Meyer, A. & Ante, L. (2020). Effects of initial coin offering characteristics on cross-listing returns. Digital Finance, 2(3), 259–283. https://doi.org/10.1007/s42521-020-00025-z
- Pernice I.G.A. (2021) On Stablecoin Price Processes and Arbitrage. In: Bernhard M. et al. (eds) Financial Cryptography and Data Security. FC 2021 International Workshops. FC 2021. Lecture Notes in Computer Science, vol 12676. Springer, Berlin, Heidelberg.
- Schär, F. (2021). Decentralized finance: On blockchain-and smart contract-based financial markets. Federal Reserve Bank of St. Louis Review, Second Quarter 2021, pp. 153-74.
- Qin K., Zhou L., Livshits B., Gervais A. (2021a) Attacking the DeFi Ecosystem with Flash Loans for Fun and Profit. In: Borisov N., Diaz C. (eds) Financial Cryptography and Data Security. FC 2021. Lecture Notes in Computer Science, vol 12674. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-662-64322-8_1
- Qin, K., Zhou, L., & Gervais, A. (2021b). Quantifying Blockchain Extractable Value: How dark is the forest? arXiv preprint arXiv:2101.05511.
- Zhou, L., Qin, K., Torres, C. F., Le, D. V., & Gervais, A. (2021). High-frequency trading on decentralized on-chain exchanges. In 2021 IEEE Symposium on Security and Privacy (SP) (pp. 428-445). IEEE.