BIS researchers concluded that liquidity provision is not decentralized apart from its technical implementation.
While decentralized finance (DeFi) promises to democratize financial markets, the Bank for International Settlements (BIS) argues that liquidity providers (LPs) on decentralized exchanges (DEXs) are not as decentralized as they appear.
On Nov. 19, the BIS published a working paper diving into Uniswap v3, one of the biggest DEXs in the DeFi landscape. In the study, the BIS set out to find whether DEXs liquidity provision truly democratizes financial markets or if they mimic traditional markets, being dominated by a few large players.
