Financial Mathematics for Cryptocurrencies

Afterword

Digital assets are such a fascinating field. I hope this book helps you explore it further. In this work, we presented several key contributions to DeFi pricing theory. We have made the explicit distinction between the value of a blockchain and the value of its assets. We have highlighted three essential constructs for pricing in DeFi: the network time, the validator account, and the wrapped token. Network time reflects the blockchain-specific temporal framework that affects all pricing models. The validator account serves as a numéraire for DeFi pricing theory under a measure for blockchain assets. Wrapped tokens enable cross-chain pricing and require new mathematical frameworks for proper valuation.

Together, these concepts allow us to bridge the current body of TradFi knowledge, in particular arbitrage pricing theory, to DeFi. However, in developing these tools, we must remember a fundamental truth about our discipline. Too often, quantitative analysts obsess and debate over what could be a perfect model. Such a pursuit is an illusion. Although the object of our field is scientific rigor, our subject remains the study of apparent chaos. This book also faces the challenge of serving three audiences at once: practitioners want tools, traders want insights, and academics want rigor. As a practitioner, not an academic, I am acutely aware of the limitations of models, ...