Trust in DeFi: An Empirical Study of the DEX

UNIVERSITY OF TECHNOLOGY SYDNEY
Finance Department
Research Seminars in Finance

Profile Picture of Zhou (Joe) Zhong

Topic: Trust in DeFi: An Empirical Study of the Decentralized Exchange

Speaker: Zhou (Joe) Zhong, University of Melbourne

Abstract: We provide empirical evidence that the decentralized cryptocurrency exchange helps reveal the consensus on the value of the cryptocurrency. By examining how investors on Binance (the largest centralized cryptocurrency exchange) trade in response to prices on Binance and Uniswap (the largest decentralized cryptocurrency exchange), we find that Uniswap liquidity provision exerts a positive impact on Binance investor trading towards the Uniswap price. We do not find Binance liquidity provision shares a similar effect. Using the launch of the “yield-farming” program as a quasi-natural experiment, we establish the causal impact of Uniswap liquidity provision on trading. Our results reflect that Uniswap, a decentralized exchange built on blockchain and smart contracts, can gain investors’ trust in its ability to aggregate the consensus of the cryptocurrency’s value. Our findings shed light that the blockchain and smart contracts powered decentralized infrastructure has the potential to provide an alternative solution to cases where a consensus underwritten by a credible central party, e.g., a centralized exchange, is not feasible or too costly to obtain.

Date: Wednesday, 1st June 2022
Time: 12:00pm - 13:00pm (Australian Eastern Standard Time)
Venue: On campus face-to-face seminar in room CB08.08.002 that will also be streamed via Zoom

Seminar protocols:

  • The webinar will run for 45 minutes, followed by a 15 minute Q&A session.
  • There will be a moderator for each seminar event, who will facilitate communication and resolve any technical issues.
  • Participants can use the chat facility or raise their had to ask questions during the presentation. The moderator will then alert the speaker at the appropriate time and either ask the questions raised or unmute the participant so they can ask the question directly to the presenter.

Co-ordinator: Kenny Phua
Enquiries: Ray Alonso

Back to Finance seminars
Acknowledgement of Country

UTS acknowledges the Gadigal people of the Eora Nation, the Boorooberongal people of the Dharug Nation, the Bidiagal people and the Gamaygal people, upon whose ancestral lands our university stands. We would also like to pay respect to the Elders both past and present, acknowledging them as the traditional custodians of knowledge for these lands.