Andreas Park PRO
Professor of Finance at UofT
What is DeFi? Overview of Topics
Presenter: Andreas Park
Decentralized Trading
payments network
Stock Exchange
Clearing House
custodian
custodian
beneficial ownership record
seller
buyer
Broker
Broker
Source of savings:
Possible transaction cost savings when applied to equity trading: \(\approx\) 30%
Source: "Learning from DeFi: Would Automated Market Makers Improve Equity Trading?" working paper, Malinova & Park 2023
Decentralized Lending
borrow
provide collateral
Application: Pool-based borrowing and lending
Automated Investment Strategies
Obvious Smart Contract Application: Automate Investment Strategies
idea: create new mutual fund like asset
"yield aggregator:" push capital where rate of return is highest
Tokenomics
What roles do tokens play?
\(\to\) key feature: no necessary intermediaries
{
{
features
consequences
liquidity \(\nearrow\)
volume \(\nearrow\)
protocol fees \(\nearrow\)
token value \(\nearrow\)
Platform economics is tricky:
Without intermediaries:
platform economics!
incentives for both?
Problems:
lesser problem because
Common solution: create a reward token! Here's how this works
Step 4: users receive a reward token based on the time that they lock up the "receipt" token
Step 3: users lock up the "receipt" token in a smart contract
Step 2: users contribute liquidity and get a "receipt" token
Step 1: create reward tokens and deposit into a smart contract
borrow
provide collateral
Application: Pool-based borrowing and lending
Same problems as with trading:
But: in contrast to trading, here you need both!
Asset Tokenization or
"The Creation of Asset-Linked Tokens"
July 31, 2025: "today I am announcing the launch of “Project Crypto”—a Commission-wide initiative to modernize the securities rules and regulations to enable America’s financial markets to move on-chain."
Tokenization is coming
Stablecoins
digital representation of a unit of a fiat currency on a blockchain
pulled from Nick Carter's talk on "Will stablecoins serve or subvert U.S. interests?"
Central Bank-Issued Digital Currencies
Evolution
2008
2014/5
2019
2020 (announced)
2025 (framework
Challenges
Source: Cambridge Bitcoin Energy Consumption Index https://cbeci.org/
Challenge 1: Energy Consumption
Ethereum Challenge 1: Environment
problem solved
Ethereum Challenge 2: Throughput
Source: Etherscan w re-scaling
Ethereum Throughput Solution: L2s/Rollups
Ethereum Challenge 3: State Size
Source: Ycharts
Money Laundering and Crime
What's special about crypto-crime?
extra info:
Final Thoughts
Some Final Thoughts
@financeUTM
andreas.park@rotman.utoronto.ca
slides.com/ap248
sites.google.com/site/parkandreas/
youtube.com/user/andreaspark2812/
By Andreas Park