Risks inherent within various models of decentralised crypto networks: A framework for an objective discussion about the level of decentralisation in crypto networks and risks to true decentralisation
Abstract
Decentralisation is not a binary concept, but a spectrum. This paper presents a starting point for an objective discussion about the levels and risks related to decentralisation across ecosystem, consensus protocol, tokens and network distribution attributes for the largest networks of today — such as Bitcoin, Ethereum, Solana, Cardano, BNB Smart Chain, Polygon, Polkadot, Uniswap, Compound, AAVE, Curve, MakerDAO and Lido. The paper argues that it is imperative to identify, mitigate, monitor, measure and manage risks for a successful decentralised network to meet its business objectives, and emphasises that the true degree of decentralisation and risks in the network are shaped by the strengths and weaknesses of the design, and further affected by market forces creating a wide range of operational, technological, financial, strategic, legal and regulatory, reputational and business risks, among many.
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Author's Biography
Julien Lüssem is a Senior Lead Experience Strategist in digital practice at Oliver Wyman in Berlin, and has seven years of expertise in product design and management
Abdel Aziz is a senior manager in the digital practice at Oliver Wyman, where he works on complex digital transformations in the world's largest companies
Antonio Frías is a seasoned knowledge manager leader, serving as a knowledge expert within the banking, payments and digital assets practices at Oliver Wyman
Ugur Koyluoglu is a partner with Oliver Wyman, based in New York. He is currently Vice Chairman for Financial Services, leading content development, and his responsibilities include being the Global Head of Digital Assets
Citation
Lüssem, Julien, Aziz, Abdel, Frías, Antonio and Koyluoglu, Ugur (2023, September 1). Risks inherent within various models of decentralised crypto networks: `A framework for an objective discussion about the level of decentralisation in crypto networks and risks to true decentralisation`. In the Journal of Risk Management in Financial Institutions, Volume 16, Issue 4. https://doi.org/10.69554/BFAC4057.
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