Decentralized Finance (DeFi) Opportunities and Risks
- Smart Contract Risk
- The first model explores both logic errors and economic exploits that characterize smart contract risk. We then focus on some specific exploits including the Yearn.finance exploit that utilized a massive flash loan.
- Governance, DNS, Oracle, DEX and Custodial Risk
- The second model explores additional risks including governance attacks, DNS attacks, oracle vulnerabilities, and DEX risk. The module ends with an exploration of the different types of custodial arrangements and the risks that each approach creates.
- Scaling Risk
- Scaling risk is one of the biggest risks facing DeFi. Current capacity of the Ethereum blockchain is only about 15 transactions per second whereas the Visa network is 65,000. This module explores potential solutions to the scaling problem.
- Regulatory and Environmental Risk
- The final module explores the regulatory risk that the DeFi space faces from KYC/AML to the potential declaration that some DeFi tokens are securities. Central bank digital currencies are also explored. We then explore the environmental impact of Proof of Work consensus and the migration to the environmentally friendly Proof of Stake.
- Winners and Losers