CandleFocus BIS Report Questions Decentralization of Liquidity Provision in Uniswap Amid Institutional Dominance
2024-11-20
Author: Content Editor
A study conducted by the Bank for International Settlements (BIS) has found that liquidity provision in decentralized finance (DeFi) is not as decentralized as believed. The analysis focused on Uniswap v3 and revealed that institutional liquidity providers dominate the market, holding around 80% of the total value locked. Retail liquidity providers earn significantly less in trading fees and may even lose money on a risk-adjusted basis. This challenges the notion of inclusivity in DeFi and raises questions about the centralization of the market, despite the technological advancements that enable access to liquidity pools for anyone. The BIS suggests that while DeFi has fewer operational barriers, the underlying characteristics leading to centralization still exist.
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