Book contents
- Frontmatter
- Contents
- Editorial Board Members
- Acknowledgements
- Part I Institutionalisation of Digital Assets
- Part II Digital Assets and Decentralised Finance
- Part III Regulations and Compliance of Digital Assets
- Part IV Cryptocurrency Economics and Monetary Policies
- 10 Monetary Policy in a World with Cryptocurrencies, Stablecoins, and Central Banks Digital Currency (CBDC)
- 11 Yields
- 12 The ‘Klair Effect’
- Abbreviations
- Index
- References
11 - Yields
The Galapagos Syndrome of Cryptofinance
from Part IV - Cryptocurrency Economics and Monetary Policies
Published online by Cambridge University Press: 06 March 2025
Book contents
- Frontmatter
- Contents
- Editorial Board Members
- Acknowledgements
- Part I Institutionalisation of Digital Assets
- Part II Digital Assets and Decentralised Finance
- Part III Regulations and Compliance of Digital Assets
- Part IV Cryptocurrency Economics and Monetary Policies
- 10 Monetary Policy in a World with Cryptocurrencies, Stablecoins, and Central Banks Digital Currency (CBDC)
- 11 Yields
- 12 The ‘Klair Effect’
- Abbreviations
- Index
- References
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Summary
In this chapter, structures that generate yield in cryptofinance will be analysed and related to leverage. While the majority of crypto-assets do not have intrinsic yields in and of themselves, similar to cash holdings of fiat currency, revolutionary innovation based on smart contracts, which enable decentralised finance, does generate return. Examples include lending or providing liquidity to an automated market maker on a decentralised exchange, as well as performing block formation in a proof of stake blockchain. On centralised exchanges, perpetual and finite duration futures can trade at a premium or discount to the spot market for extended periods with one side of the transaction earning a yield. Disparities in yield exist between products and venues as a result of market segmentation and risk profile differences. Cryptofinance was initially shunned by legacy finance and developed independently. This led to curious and imaginative adaptions, reminiscent of Darwin’s finches, including stable coins for dollar transfers, perpetuals for leverage, and a new class of exchanges for trading and investment.
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- Information
- Digital AssetsPricing, Allocation and Regulation, pp. 242 - 268Publisher: Cambridge University PressPrint publication year: 2025
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