Quotes from Campbell R. Harvey

An equity token – not to be confused with equities or stocks in the traditional finance sense – represents ownership of an underlying asset or pool of assets.

Any platform with admin-controlled functionality is not truly DeFi because of the admins' centralized control. A contract without the capacity for change is necessarily rigid, however, and has no way to adapt to bugs in the code or changing economic or technical conditions. For this reason, many platforms strive for a decentralized upgrade process, often mediated by a governance token.

A governance token can be implemented in many ways: with a static, an inflationary, or even a deflationary supply.

Many platforms issue the governance token via an inflation schedule that incentivizes people to use particular features of the platform, ensuring the governance token is distributed directly to them.

Burning a token means removing it from circulation and can be done in two ways: (1) manually send it to an unowned Ethereum address; or (2) even more efficiently, create a contract that is incapable of spending it. Either approach renders the burned tokens unusable, although the decrease in circulating supply would not be "known" by the token contract.

The flip side of burning is minting, which increases the number of tokens in circulation.

Rewarding user behavior with increases in supply (inflationary rewards) has become a common practice to encourage actions such as supplying liquidity or using a particular platform. Consequently, many users engage in yield farming, taking actions to seek the highest possible rewards.

Platforms can bootstrap their networks by issuing a token with an additional value proposition in the network. Users can keep the token and deploy it in the context of the network or sell it for a profit. Either way, employing tokens in a platform usually increases activity.

The growth rate of the bonding curve is important in determining users' performance. A linear growth rate would generously reward early users if the token grows to a sufficiently large supply.

We will look at two different categories of incentives: (1) staked incentives, which apply to a balance of tokens custodied in a smart contract; and (2) direct incentives, which apply to users within the system who do not have a custodied balance.

staking reward is a positive incentive by which users receive a bonus in their token balance based on the amount of capital they have contributed to the system. Options for customization include applying a minimum threshold to all staked balances on a pro rata basis, either a fixed or pro rata payout, and a token that is the same or different from the staked one.

The form of money has changed over time, but the basic infrastructure of financial institutions has not.

Given it costs no more to provide services to a customer with $100 or $100 million in assets, we believe that DeFi will replace all meaningful centralized financial infrastructure in the future.

DeFi is fundamentally a competitive marketplace of decentralized financial applications that function as various financial "primitives" such as exchange, save, lend, and tokenize. These applications benefit from the network effects of combining and recombining DeFi products and attracting increasingly more market share from the traditional financial ecosystem.

DeFi offers considerable potential for solving the following five key problems associated with centralized finance: centralized control, limited access, inefficiency, lack of inoperability, and opacity.

Limited Access. Today, 1.7 billion people are unbanked, making it very challenging for them to obtain loans and to operate in the world of internet commerce.

keepers are external participants directly incentivized to provide a service to DeFi protocols, such as monitoring positions to safeguard that they are sufficiently collateralized or triggering state updates for various functions.

Modern coinage came much later, first emerging in Lydia around 600 BCE and providing what we think of as today's functions of money: unit of account, medium of exchange, and store of value.

Important characteristics of money included durability, portability, divisibility, uniformity, limited supply, acceptability, and stability.

An even earlier example was the rise of dark pool stock trading. In 1979, the U.S. Securities and Exchange Commission (SEC) instituted Rule 19c3, which allowed stocks listed on one exchange, such as the New York Stock Exchange (NYSE), to be traded off-exchange. Many large institutions moved their trading large blocks to these dark pools, where they traded peer to peer with far lower costs than traditional exchange-based trading.

The key innovation of Bitcoin was to combine the idea of blockchain (time stamping) with a consensus mechanism called proof of work

Blockchains allow for cryptographic scarcity (Bitcoin has a fixed supply cap of 21 million), censorship resistance and user sovereignty (no entity other than the user can determine how to use funds), and portability (can send any quantity anywhere for a low flat fee). These features combined in a single technology make cryptocurrency a powerful innovation.

Many argue that Bitcoin has no "tangible" value and therefore should be worthless. Continuing the gold comparison, approximately two-thirds of gold is used for jewelry, and an additional amount is used in technology hardware. Gold has tangible value.

In the context of smart contract platforms, an oracle is any data source for reporting information external to the blockchain. How can we create an oracle that can authoritatively speak about off-chain information in a trust-minimized way? Many applications require an oracle, and the implementations exhibit varying degrees of centralization.