DeFi and the Future of Finance: Predictions and Trends for 2023


25 May 2023
DeFi and the Future of Finance: Predictions and Trends for 2023

Decentralized Finance, commonly known as DeFi, is transforming the financial landscape in unprecedented ways. By eliminating intermediaries and harnessing the power of blockchain technology, DeFi offers a revolutionary approach to conducting financial transactions. From lending and borrowing to insurance and asset management, DeFi platforms are democratizing access to financial services and fostering a new era of financial inclusion. As we venture further into 2023, it becomes increasingly clear that DeFi is not merely a transient trend, but a critical component of the future of finance.

The Evolution of DeFi

The inception of DeFi can be traced back to the advent of Bitcoin, the world's first decentralized cryptocurrency. Bitcoin demonstrated the potential of a decentralized financial system, laying the groundwork for the DeFi movement. Since then, DeFi has evolved tremendously, fueled by the advent of Ethereum and its smart contract capabilities, which opened up a multitude of possibilities for decentralized applications (dApps). Over the years, numerous DeFi platforms have emerged, each offering unique solutions to traditional financial challenges. As of 2023, DeFi has reached unprecedented levels of growth and adoption, establishing its place at the forefront of financial innovation.

DeFi Explained

As we navigate through 2023, DeFi continues to make waves in the financial ecosystem. Several key trends have emerged that signal the trajectory of this disruptive technology. These trends range from increased adoption and integration, regulatory developments, innovative technology breakthroughs, to influences from the cryptocurrency market.

Key trends

A. Increased Adoption and Integration

One of the most significant trends in 2023 is the increased adoption of DeFi by traditional financial institutions. Banks, insurance companies, and other financial service providers are increasingly recognizing the value of DeFi. By leveraging DeFi protocols, these institutions can offer their customers more efficient, cost-effective services. We're also witnessing the integration of DeFi applications into everyday financial transactions. For instance, decentralized exchanges (DEXs) are becoming popular platforms for trading digital assets, while lending and borrowing platforms are providing viable alternatives to traditional loans.

B. Regulatory Developments

As DeFi becomes more prevalent, it's inevitably attracting the attention of regulatory bodies. In 2023, we're seeing a surge in regulatory developments aimed at DeFi. While these regulations pose new challenges, they also provide a degree of legal certainty that can potentially foster increased institutional participation. Some jurisdictions have introduced licensing requirements for DeFi platforms, while others are developing frameworks for the taxation of DeFi transactions. As this regulatory landscape continues to evolve, it will undoubtedly shape the future trajectory of DeFi.

Are you interested in the legal aspects in blockchain? Check out our article on dao legal structures.

C. Innovations in DeFi Technology

This year, we're also seeing exciting innovations in DeFi technology. Blockchain and AI technologies are at the forefront of these innovations. For instance, Layer 2 solutions are being increasingly used to enhance the scalability and efficiency of DeFi platforms. AI, on the other hand, is being utilized to improve risk assessment models and automate decision-making processes in DeFi platforms.

D. Cryptocurrency and DeFi

The world of cryptocurrencies and DeFi are intrinsically linked. In 2023, the trends in the cryptocurrency market are having a significant impact on DeFi. The rise of non-fungible tokens (NFTs) and the growing interest in decentralized autonomous organizations (DAOs) are influencing the types of services offered by DeFi platforms. Moreover, the increasing popularity of stablecoins is bolstering the use of DeFi, providing a less volatile option for transactions.

In summary, DeFi is experiencing a dynamic evolution in 2023, shaped by a multitude of factors ranging from adoption and regulatory changes to technological innovations and cryptocurrency trends.

Predictions for DeFi and the Future of Finance

As we look towards DeFi and the future of finance beyond 2023, several key predictions can be made based on current trends and developments:

  • Market Growth: The DeFi market is expected to experience substantial growth. As more institutions adopt DeFi protocols and technologies, and as regulatory frameworks become more defined, we can anticipate an increase in the overall market capitalization of DeFi.
  • Technological Advancements: We expect to see continual technological advancements in the DeFi sector. Innovations will likely focus on improving scalability, efficiency, and security of DeFi platforms. The use of AI in DeFi could also become more prevalent, enhancing functionalities such as automated trading and risk assessment.
  • Greater Integration with Traditional Finance: DeFi is predicted to become more deeply integrated into the traditional financial system. This could mean more partnerships between traditional banks and DeFi platforms, and an increase in DeFi services offered by mainstream financial institutions.
  • Broader Adoption of DeFi Services: With increasing awareness and understanding of DeFi, more individuals and businesses are expected to use DeFi services for lending, borrowing, insurance, asset management, and more.
  • Emergence of New DeFi Platforms and Services: As the DeFi space matures, we predict the emergence of new platforms and services. This could include new types of decentralized exchanges, lending platforms, and innovative DeFi applications we have yet to envision.
  • Regulatory Evolution: As DeFi grows, so will the attention it receives from regulatory bodies. It's likely we'll see further evolution in DeFi-related regulations, which will shape the development and operation of DeFi platforms.


As we navigate through 2023, DeFi continues to shape the future of finance in profound ways. Its transformative influence extends from traditional financial institutions to everyday financial transactions, driven by innovative technologies and the dynamic cryptocurrency market. While there are challenges to overcome, including regulatory developments and technical hurdles, the potential for a more accessible and efficient financial system is undeniable.

The future is promising as we anticipate further growth, technological advancements, and broader adoption of DeFi services. As we continue exploring this exciting frontier, stay tuned for more insights and updates on the ever-evolving world of DeFi.

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Token Engineering Process

Kajetan Olas

13 Apr 2024
Token Engineering Process

Token Engineering is an emerging field that addresses the systematic design and engineering of blockchain-based tokens. It applies rigorous mathematical methods from the Complex Systems Engineering discipline to tokenomics design.

In this article, we will walk through the Token Engineering Process and break it down into three key stages. Discovery Phase, Design Phase, and Deployment Phase.

Discovery Phase of Token Engineering Process

The first stage of the token engineering process is the Discovery Phase. It focuses on constructing high-level business plans, defining objectives, and identifying problems to be solved. That phase is also the time when token engineers first define key stakeholders in the project.

Defining the Problem

This may seem counterintuitive. Why would we start with the problem when designing tokenomics? Shouldn’t we start with more down-to-earth matters like token supply? The answer is No. Tokens are a medium for creating and exchanging value within a project’s ecosystem. Since crypto projects draw their value from solving problems that can’t be solved through TradFi mechanisms, their tokenomics should reflect that. 

The industry standard, developed by McKinsey & Co. and adapted to token engineering purposes by Outlier Ventures, is structuring the problem through a logic tree, following MECE.
MECE stands for Mutually Exclusive, Collectively Exhaustive. Mutually Exclusive means that problems in the tree should not overlap. Collectively Exhaustive means that the tree should cover all issues.

In practice, the “Problem” should be replaced by a whole problem statement worksheet. The same will hold for some of the boxes.
A commonly used tool for designing these kinds of diagrams is the Miro whiteboard.

Identifying Stakeholders and Value Flows in Token Engineering

This part is about identifying all relevant actors in the ecosystem and how value flows between them. To illustrate what we mean let’s consider an example of NFT marketplace. In its case, relevant actors might be sellers, buyers, NFT creators, and a marketplace owner. Possible value flow when conducting a transaction might be: buyer gets rid of his tokens, seller gets some of them, marketplace owner gets some of them as fees, and NFT creators get some of them as royalties.

Incentive Mechanisms Canvas

The last part of what we consider to be in the Discovery Phase is filling the Incentive Mechanisms Canvas. After successfully identifying value flows in the previous stage, token engineers search for frictions to desired behaviors and point out the undesired behaviors. For example, friction to activity on an NFT marketplace might be respecting royalty fees by marketplace owners since it reduces value flowing to the seller.


Design Phase of Token Engineering Process

The second stage of the Token Engineering Process is the Design Phase in which you make use of high-level descriptions from the previous step to come up with a specific design of the project. This will include everything that can be usually found in crypto whitepapers (e.g. governance mechanisms, incentive mechanisms, token supply, etc). After finishing the design, token engineers should represent the whole value flow and transactional logic on detailed visual diagrams. These diagrams will be a basis for creating mathematical models in the Deployment Phase. 

Token Engineering Artonomous Design Diagram
Artonomous design diagram, source: Artonomous GitHub

Objective Function

Every crypto project has some objective. The objective can consist of many goals, such as decentralization or token price. The objective function is a mathematical function assigning weights to different factors that influence the main objective in the order of their importance. This function will be a reference for machine learning algorithms in the next steps. They will try to find quantitative parameters (e.g. network fees) that maximize the output of this function.
Modified Metcalfe’s Law can serve as an inspiration during that step. It’s a framework for valuing crypto projects, but we believe that after adjustments it can also be used in this context.

Deployment Phase of Token Engineering Process

The Deployment Phase is final, but also the most demanding step in the process. It involves the implementation of machine learning algorithms that test our assumptions and optimize quantitative parameters. Token Engineering draws from Nassim Taleb’s concept of Antifragility and extensively uses feedback loops to make a system that gains from arising shocks.

Agent-based Modelling 

In agent-based modeling, we describe a set of behaviors and goals displayed by each agent participating in the system (this is why previous steps focused so much on describing stakeholders). Each agent is controlled by an autonomous AI and continuously optimizes his strategy. He learns from his experience and can mimic the behavior of other agents if he finds it effective (Reinforced Learning). This approach allows for mimicking real users, who adapt their strategies with time. An example adaptive agent would be a cryptocurrency trader, who changes his trading strategy in response to experiencing a loss of money.

Monte Carlo Simulations

Token Engineers use the Monte Carlo method to simulate the consequences of various possible interactions while taking into account the probability of their occurrence. By running a large number of simulations it’s possible to stress-test the project in multiple scenarios and identify emergent risks.

Testnet Deployment

If possible, it's highly beneficial for projects to extend the testing phase even further by letting real users use the network. Idea is the same as in agent-based testing - continuous optimization based on provided metrics. Furthermore, in case the project considers airdropping its tokens, giving them to early users is a great strategy. Even though part of the activity will be disingenuine and airdrop-oriented, such strategy still works better than most.

Time Duration

Token engineering process may take from as little as 2 weeks to as much as 5 months. It depends on the project category (Layer 1 protocol will require more time, than a simple DApp), and security requirements. For example, a bank issuing its digital token will have a very low risk tolerance.

Required Skills for Token Engineering

Token engineering is a multidisciplinary field and requires a great amount of specialized knowledge. Key knowledge areas are:

  • Systems Engineering
  • Machine Learning
  • Market Research
  • Capital Markets
  • Current trends in Web3
  • Blockchain Engineering
  • Statistics


The token engineering process consists of 3 steps: Discovery Phase, Design Phase, and Deployment Phase. It’s utilized mostly by established blockchain projects, and financial institutions like the International Monetary Fund. Even though it’s a very resource-consuming process, we believe it’s worth it. Projects that went through scrupulous design and testing before launch are much more likely to receive VC funding and be in the 10% of crypto projects that survive the bear market. Going through that process also has a symbolic meaning - it shows that the project is long-term oriented.

If you're looking to create a robust tokenomics model and go through institutional-grade testing please reach out to Our team is ready to help you with the token engineering process and ensure your project’s resilience in the long term.


What does token engineering process look like?

  • Token engineering process is conducted in a 3-step methodical fashion. This includes Discovery Phase, Design Phase, and Deployment Phase. Each of these stages should be tailored to the specific needs of a project.

Is token engineering meant only for big projects?

  • We recommend that even small projects go through a simplified design and optimization process. This increases community's trust and makes sure that the tokenomics doesn't have any obvious flaws.

How long does the token engineering process take?

  • It depends on the project and may range from 2 weeks to 5 months.

What is Berachain? 🐻 ⛓️ + Proof-of-Liquidity Explained


18 Mar 2024
What is Berachain? 🐻 ⛓️ + Proof-of-Liquidity Explained

Enter Berachain: a high-performance, EVM-compatible blockchain that is set to redefine the landscape of decentralized applications (dApps) and blockchain services. Built on the innovative Proof-of-Liquidity consensus and leveraging the robust Polaris framework alongside the CometBFT consensus engine, Berachain is poised to offer an unprecedented blend of efficiency, security, and user-centric benefits. Let's dive into what makes it a groundbreaking development in the blockchain ecosystem.

What is Berachain?


Berachain is an EVM-compatible Layer 1 (L1) blockchain that stands out through its adoption of the Proof-of-Liquidity (PoL) consensus mechanism. Designed to address the critical challenges faced by decentralized networks. It introduces a cutting-edge approach to blockchain governance and operations.

Key Features

  • High-performance Capabilities. Berachain is engineered for speed and scalability, catering to the growing demand for efficient blockchain solutions.
  • EVM Compatibility. It supports all Ethereum tooling, operations, and smart contract languages, making it a seamless transition for developers and projects from the Ethereum ecosystem.
  • Proof-of-Liquidity.This novel consensus mechanism focuses on building liquidity, decentralizing stake, and aligning the interests of validators and protocol developers.


EVM-Compatible vs EVM-Equivalent


EVM compatibility means a blockchain can interact with Ethereum's ecosystem to some extent. It can interact supporting its smart contracts and tools but not replicating the entire EVM environment.


An EVM-equivalent blockchain, on the other hand, aims to fully replicate Ethereum's environment. It ensures complete compatibility and a smooth transition for developers and users alike.

Berachain's Position

Berachain can be considered an "EVM-equivalent-plus" blockchain. It supports all Ethereum operations, tooling, and additional functionalities that optimize for its unique Proof-of-Liquidity and abstracted use cases.

Berachain Modular First Approach

At the heart of Berachain's development philosophy is the Polaris EVM framework. It's a testament to the blockchain's commitment to modularity and flexibility. This approach allows for the easy separation of the EVM runtime layer, ensuring that Berachain can adapt and evolve without compromising on performance or security.

Proof Of Liquidity Overview

High-Level Model Objectives

  • Systemically Build Liquidity. By enhancing trading efficiency, price stability, and network growth, Berachain aims to foster a thriving ecosystem of decentralized applications.
  • Solve Stake Centralization. The PoL consensus works to distribute stake more evenly across the network, preventing monopolization and ensuring a decentralized, secure blockchain.
  • Align Protocols and Validators. Berachain encourages a symbiotic relationship between validators and the broader protocol ecosystem.

Proof-of-Liquidity vs Proof-of-Stake

Unlike traditional Proof of Stake (PoS), which often leads to stake centralization and reduced liquidity, Proof of Liquidity (PoL) introduces mechanisms to incentivize liquidity provision and ensure a fairer, more decentralized network. Berachain separates the governance token (BGT) from the chain's gas token (BERA) and incentives liquidity through BEX pools. Berachain's PoL aims to overcome the limitations of PoS, fostering a more secure and user-centric blockchain.

Berachain EVM and Modular Approach

Polaris EVM

Polaris EVM is the cornerstone of Berachain's EVM compatibility, offering developers an enhanced environment for smart contract execution that includes stateful precompiles and custom modules. This framework ensures that Berachain not only meets but exceeds the capabilities of the traditional Ethereum Virtual Machine.


The CometBFT consensus engine underpins Berachain's network, providing a secure and efficient mechanism for transaction verification and block production. By leveraging the principles of Byzantine fault tolerance (BFT), CometBFT ensures the integrity and resilience of the Berachain blockchain.


Berachain represents a significant leap forward in blockchain technology, combining the best of Ethereum's ecosystem with innovative consensus mechanisms and a modular development approach. As the blockchain landscape continues to evolve, Berachain stands out as a promising platform for developers, users, and validators alike, offering a scalable, efficient, and inclusive environment for decentralized applications and services.


For those interested in exploring further, a wealth of resources is available, including the Berachain documentation, GitHub repository, and community forums. It offers a compelling vision for the future of blockchain technology, marked by efficiency, security, and community-driven innovation.


How is Berachain different?

  • It integrates Proof-of-Liquidity to address stake centralization and enhance liquidity, setting it apart from other blockchains.

Is Berachain EVM-compatible?

  • Yes, it supports Ethereum's tooling and smart contract languages, facilitating easy migration of dApps.

Can it handle high transaction volumes?

  • Yes, thanks to the Polaris framework and CometBFT consensus engine, it's built for scalability and high throughput.