#DeFi #AlternativeInvestment #MSFinance #Chula
This video is part two of a two-part special lectures on Decentralized Finance (DeFi) for the Alternative Investment Course of the MS Finance Program at Chulalongkorn Business School.
0:00 Recap from part 1
2:08 Case study: #Compound
37:00 The most important concept in DeFi: depository receipt
47:32 COMP distribution: the prototype of DeFi #yieldfarming
1:18:20 Decentralized exchanges (#DEX) and automated market maker (#AMM) algorithm
1:48:45 DeFi capital efficiency and coining DeFi 2.0
1:58:19 Kashi lending (single collateral lending pool) and the birth of #Abracadabra (repeated leverage protocol)
2:14:51 DeFi asset management: leveraged yield farming and AMM DEX pools
2:24:04 DeFi hot money and the birth of #OlympusDAO
2:52:04 DeFi leverage and potential systemic risk
In this part, we begin with lending protocol through the case study of Compound to show the importance of overcollateralization and the influence of pool utilization on interest rate. Compound also serves as an example of liquidity mining / yield farming of governance token rewards.
A lot of the financial economics in DeFi relies on security design / securitization, which creates new financial liabilities from a pool of assets. The same insight can be used to analyze stablecoins, which are a special case of synthetic assets. In short, most DeFi transactions involve creating “depository receipts”.
We discuss the birth of automatic market maker (AMM) protocol in decentralized exchanges as a result of saving gas cost and the impact on price slippage.
As tokens are freely usable as building blocks, this allows a new breed of protocols (DeFi 2.0) that work across multiple protocols. We discuss this new phenomenon in the context of Abracadabra Finance and OlympusDAO.