Fabian Schär authors a great piece published by the St. Louis Fed on “Decentralized Finance: On Blockchain- and Smart Contract-Based Financial Markets”.
“DeFi offers exciting opportunities and has the potential to create a truly open, transparent, and immutable financial infrastructure. Because DeFi consists of numerous highly interoperable protocols & applications, every individual can verify all transactions and data is readily available for users and researchers to analyze.”
Moreover: “Whenever a smart contract depends on data that are not natively available on-chain, the data must be provided by external data sources. These so-called oracles introduce dependencies and may lead to heavily centralized contract execution. To mitigate this risk, many projects rely on decentralized oracle networks with a large variety of data provision schemes.”
Credentialed, verified data (#Inveniam) that can be trusted by 3rd parties is critical for owners of private market assets that need to understand the value of their portfolio. The DLT opens the door for this…as they say at LSEG, “open makes more possible.” The report states: “The blockchain can be seen as the foundation for trustless execution and serves as a settlement and dispute resolution layer.”