Call for Papers: Special Issue on Decentralized Finance

Overview:

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.

References:

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.

Instructions for Submission:

For submission, authors are requested to access the Editorial Manager at the following URL: https://www.editorialmanager.com/dfin/default.aspx. Please answer ``YES'' when asked if your manuscript belongs to a special issue and select the special issue in the list that will pop up.

Potential authors are reminded that all papers that are finally accepted for this special issue will be subject to format restrictions complying with the publisher's standards. To speed up publication, and to ensure a unified layout throughout the special issue, authors are likely advised to use a LaTex. Springer's LaTex package (Download zip, 188 kB) can be used to prepare source files (please choose the formatting option "smallextended'"). The authors are highly recommended not to modify the class file by introducing personal settings and/or definitions. Word files are also accepted.

Editor of the Special Issue:

Lennart Ante, Co-Founder & Researcher, Blockchain Research Lab gGmbH, Germany, ante@blockchainresearchlab.org

Important Dates:

Deadline for paper submission: 31 July 2022