Cambridge digital tool to derisk $100bn+ decentralised finance ecosystem
The invention of the Cambridge DeFi Navigator (CDN) is timely. The DeFi ecosystem has experienced extraordinary growth, with Total Value Locked (TVL) surging from a few billion dollars in its early stages to more than $100bn today, says the CCAF report.
It says that while this expansion presents unprecedented opportunities for historically unbanked individuals it also exposes participants to several risks including security vulnerabilities, governance challenges and the complexities of an evolving regulatory environment.
At a time when Bitcoin has reached an all-time high and DeFi’s influence continues to grow, the release of the Cambridge DeFi Navigator aims to shed light on both adoption trends and the risks involved with participating in this ecosystem.
The CCAF says the tool equips industry participants, policymakers and researchers with essential insights into the dynamics and risks of the ecosystem, enabling them to navigate DeFi with greater transparency and confidence.
The new open-access digital Cambridge DeFi Navigator has a dashboard that provides policymakers, financial authorities, industry professionals and the general public with a trusted and comprehensive source of decentralised finance data and educational content. With real-time datasets and interactive visualisations, it provides greater transparency and insights into the DeFi landscape, the Cambridge team says.
The DeFi taxonomy the team has developed aims to bridge the understanding between traditional and decentralised finance. To visually portray the ecosystem, the navigator maps the protocols according to the developed taxonomy and provides insights into the value flows from one DeFi sector to another.
The tool also offers insights into the adoption of various protocols and DeFi sectors over time by identifying variations in capital flows within the ecosystem. And it highlights several critical risks within DeFi such as governance token distribution, custody, security and other economic indicators, enabling a detailed and analytical evaluation of the problems involved with specific protocols.
Christopher Jack, CDAP Programme Manager at the CCAF, says: “More empirical data and insights on the development of DeFi ecosystem underpinned by a working taxonomy will shed light on this complex and evolving sector, to unlock sustainable growth potential and mitigate existing and emergent risks.”
Bryan Zhang, Co-Founder and Executive Director of the CCAF, added that the empirical data for the dashboard was sourced from various leading providers, including Alterscope, DeFiLlama and Flipside.
CDAP’s founding institutional collaborators include globally renowned financial players such as (in alphabetical order): Bank for International Settlements (BIS) Innovation Hub; British International Investment (BII); Dubai International Finance Centre; EY; Fidelity Investments; UK Foreign, Commonwealth & Development Office; Goldman Sachs; Inter-American Development Bank; International Monetary Fund; Invesco; Mastercard; MSCI; Visa and World Bank.
Four new members have recently joined the effort: NatWest; Switzerland’s State Secretariat for Economic Affairs; Euroclear and the Depository Trust & Clearing Corporation.