Decentralized Finance on the Blockchain in 2023 (Q&A from the Webcast)

    Posted by Dec 14, 2023 4:46:33 PM / Jean-Luc Verhelst

    1. How is regulation evolving?

    Regulation is continuously evolving, varying across jurisdictions. Nevertheless, the general trend is that regulation is maturing and tries to integrate crypto-assets. For example, in Europe, the MICA Regulation sets directives for different players in the crypto-space. It also classifies tokens in different categories and, as such, these tokens will have to follow specific requirements and might be subject to specific, new or existing regulation. As a result, more and more players in capital markets are seeking licences to offer crypto-related services. It is expected that regulation will continue to evolve positively in the short term.

    2. Considering AI's prowess, where can AI be a part of the blockchain community to validate transactions?

    Transaction validation on the blockchain is carried out using binary cryptographic tools, impervious to AI influence. However, in scenarios involving transactions between the blockchain and a regulated centralized entity, we could imagine that the centralized player uses AI to help in the detection of transactions having a higher risk from a compliance perspective. It is important to note that this is independent of the transaction on the blockchain.

    3. Can AI manipulate the blockchain's code to authenticate the transactions?

    No, the code is deterministic and relies on secure cryptographic principles. As we will learn in the Blockchain for Financial Markets course, only quantum computers might affect a limited number of security aspects. However, solutions to maintain blockchain security in a quantum-enabled world already exist and can be readily implemented. Therefore, there are currently no realistic threats or foreseeable challenges regarding transaction authentication.

    4. How are the transaction authentication community members selected?

    The members responsible for consolidating and validating transactions depend on the consensus mechanism employed by the blockchain. In the typical proof-of-work consensus mechanism, anyone can become a member tasked with authenticating transactions. Throughout the Blockchain for Financial Markets course, we will distinguish between 'consolidating nodes' and 'validating nodes,' with each serving as a check on the other. In the context of a proof-of-stake consensus mechanism, multiple selection processes are in place, and members are often randomly chosen. The amount of stake a member holds may influence their chances of selection.

    5. In digital real estate, would blockchain stable coins will be the currency?

    Digital real estate (often represented by NFTs in a metaverse) might be purchased with stable coins or other tokens. It is important to realize here that stable-coins are only one type of token and that there are many ways of expressing value. In the mainstream world, we often use fiat currency to express the value of something. However, the value of one asset can also be expressed in any other asset. In the blockchain / web3 space, tokens can easily be swapped for other tokens based on the market value of both tokens. With that said, within a blockchain application, such as digital real estate, one token might be required to access a specific asset or service. Access to this token itself may be possible, or not possible, through different means depending on the token design. As such, a token might be easily swappable for other tokens or be granted and not transferable to a person who fulfils certain conditions. In short, everything is possible and depends on what we want to achieve.


    Related Course

    Blockchain for Financial Markets


    Topics: Blockchain, Decentralised Finance

    Written by Jean-Luc Verhelst

    Jean-Luc Verhelst is the author of the book Bitcoin, the Blockchain and Beyond (2017) and a renowned public speaker, trainer and advisor on blockchain. He teaches at multiple universities and training centers in Europe and the Middle East and advises corporates on their blockchain journey through workshops and advisory. Prior to his current position, he worked several years as a strategy consultant and became the blockchain leader for Deloitte Belgium after having spent several months at Deloitte’s EMEA Blockchain Lab. He worked for numerous clients in Europe, managed the development of blockchain solutions, and delivered internal trainings in EMEA and the USA. He also co-founded blockchain communities, was selected by the European Commission as a member of the EU Blockchain Observatory and Forum and won the world’s largest blockchain hackathon of 2016. His master thesis on Bitcoin received the award for best financial thesis of 2014 in Belgium. Jean-Luc holds academic degrees in IT and business. Most importantly, Jean-Luc has a real passion for blockchains and how they will shape our future.

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