Decentralized Financial Markets v.0
Introduction
There is a technology, Web 3, that enables the transfer of value between users of a network in a secure, decentralized, and private manner, with the power to modernize financial markets.
Smart Contracts
Smart contracts refer to software that exists for the purpose of storing value in a neutral agent within a decentralized financial market. This type of software guarantees that 2 or more agents can preset conditions — in principle to do, give, or refrain from doing — that, if satisfied, will trigger a transfer of value.
Blockchains
Blockchains refer to the databases that record the transaction history and store the smart contracts.
Decentralized Networks
Decentralized networks refer to a set of users who transact with each other according to a set of preset rules. These rules can establish what asset will be traded (USD, etc.), what the consensus mechanism will be, among others.
Automated Market Maker (AMM)
One of the advantages of a digital financial market is the use of algorithms as Market Makers, which represents an advantage in several ways:
- No intermediation required: A sell order can be executed without the need for a trader or any other intermediary.
- Transparency: It can be guaranteed that the price is public and unique at every moment.
- Immediacy: As long as there is liquidity, the transaction can be executed immediately.
See AMM Algorithm for a more detailed analysis of the AMM algorithm.
Research Objectives
- Identify the main challenges for the adoption of this technology in an exchange such as the BMV
- Quantify the cost of implementing such a solution for the transaction volume that exists at the BMV on a public Blockchain.
Introduction
There is a technology, Web 3, that enables the transfer of value between users of a network in a secure, decentralized, and private manner, with the power to modernize financial markets.
Smart Contracts
Smart contracts refer to software that exists for the purpose of storing value in a neutral agent within a decentralized financial market. This type of software guarantees that 2 or more agents can preset conditions — in principle to do, give, or refrain from doing — that, if satisfied, will trigger a transfer of value.
Blockchains
Blockchains refer to the databases that record the transaction history and store the smart contracts.
Decentralized Networks
Decentralized networks refer to a set of users who transact with each other according to a set of preset rules. These rules can establish what asset will be traded (USD, etc.), what the consensus mechanism will be, among others.
Automated Market Maker (AMM)
One of the advantages of a digital financial market is the use of algorithms as Market Makers, which represents an advantage in several ways:
- No intermediation required: A sell order can be executed without the need for a trader or any other intermediary.
- Transparency: It can be guaranteed that the price is public and unique at every moment.
- Immediacy: As long as there is liquidity, the transaction can be executed immediately.
Research Objectives
- Identify the main challenges for the adoption of this technology in an exchange such as the BMV
- Quantify the cost of implementing such a solution for the transaction volume that exists at the BMV on a public Blockchain.
This proposal evolved into Decentralized Financial Markets v.1 and eventually into the formal proposal Decentralized Financial Contracts v.1.