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The Origins of Market Power in DeFi

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Abstract

In our previous Liberty Street Economics post, we introduced the decentralized finance (DeFi) intermediation chain and explained how various players have emerged as key intermediaries in the Ethereum ecosystem. In this post, we summarize the empirical results in our new Staff Report that explains how the need for transaction privacy across the DeFi intermediation chain gives rise to intermediaries’ market power.

Suggested Citation

  • Pablo D. Azar & Adrian Casillas & Maryam Farboodi, 2025. "The Origins of Market Power in DeFi," Liberty Street Economics 20250421, Federal Reserve Bank of New York.
    • Handle: RePEc:fip:fednls:99874
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    More about this item

    Keywords

    financial intermediation; market power; decentralized finance;
    All these keywords.

    JEL classification:

    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection

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