A Review on the Security of the Ethereum-Based DeFi Ecosystem

Decentralized finance(DeFi)is a general term for a series of financial products and services.It is based on blockchain technology and has attracted people’s attention because of its open,transparent,and intermediary free.Among them,the DeFi ecosystem based on Ethereum-based blockchains attracts the most attention.However,the current decentralized financial system built on the Ethereum architecture has been exposed to many smart contract vulnerabilities during the last few years.Herein,we believe it is time to improve the understanding of the prevailing Ethereum-based DeFi ecosystem security issues.To that end,we investigate the Ethereum-based DeFi security issues:1)inherited from the real-world financial system,which can be solved by macro-control;2)induced by the problems of blockchain architecture,which require a better blockchain platform;3)caused by DeFi invented applications,which should be focused on during the project development.Based on that,we further discuss the current solutions and potential directions ofDeFi security.According to our research,we could provide a comprehensive vision to the research community for the improvement of Ethereum-basedDeFi ecosystem security.

Automated market makers and decentralized exchanges:a DeFi primer

Recent advancements in decentralized finance(DeFi)have resulted in a rapid increase in the use of Automated Market Makers(AMMs)for creating decentralized exchanges(DEXs).In this paper,we organize these developments by treating an AMM as a neoclassical black-box characterized by the conversion of inputs(tokens)to outputs(prices).The conversion is governed by the technology of the AMM summarized by an‘exchange function’.Various types of AMMs are examined,including:Constant Product Market Makers;Constant Mean Market Makers;Constant Sum Market Makers;Hybrid Function Market Makers;and,Dynamic Automated Market Makers.The paper also looks at the impact of introducing concentrated liquidity in an AMM.Overall,the framework presented here provides an intuitive geometric representation of how an AMM operates,and a clear delineation of the similarities and differences across the various types of AMMs.

A Value Token Transfer Protocol (VTTP) for Decentralized Finance

We present Value Token Transfer Protocol (VTTP), a decentralized finance protocol for exchange of value or tokens within and between participating blockchain networks, fiat bank accounts and fiat wallets. The protocol allows intra-chain or inter-chain transfers of cryptocurrencies or tokens. VTTP works in both client-server and peer-to-peer models. The protocol comprises receiving from a client a transfer request to transfer value in a form of a cryptocurrency or a token, determining if the transfer request is intra-chain or inter-chain, transmitting to the client a response to the transfer request, the response comprising a raw transaction, receiving from the client a response to the raw transaction wherein a private key of a user is used to sign the raw transaction, defining a signed transaction, verifying a signature of the signed transaction and broadcasting the signed transaction to the sending and receiving blockchain networks.