Decentralized Finance Analysis

The multitude of Decentralized Finance (DeFi) protocols that appeared in the last couple of years has brought a wide range of financial products, with new protocols building on the previous ones by either integrating them or simply forking the available open-source code and start developing on top of it. This creates a highly interconnected ecosystem, with many inter-dependent parts, similar to Lego pieces. This paper tries to get a glimpse inside this ecosystem and see how different protocols are composed and how they might interact with each other. DeFi composability might also present risks, this is however out of scope for this paper. The proposed analysis represents only the first phase of a much larger study, and it aims at gaining an initial understanding of the involved protocols, establishing a methodology for data collection and processing, building and analysing a small-scale network of smart contract interactions. The preliminary results were consistent with the high-level observations regarding the composability, as well as being in line with previous studies on Ethereum network measurements.