Deciphering DeFi: A Comprehensive Analysis and Visualization of Risks in Decentralized Finance
Round 1
Reviewer 1 Report
Dear Authors,
I have reviewed your paper and found it to be well-structured and comprehensive. You have made significant efforts to categorize and analyze risks in both DeFi and TradFi, and the introduction of the 'Risk Wheel' is an innovative contribution that has the potential to aid stakeholders in risk assessment and management within the DeFi ecosystem. Moreover, your literature review is extensive and serves as a solid foundation for your analysis.
However, it could benefit from more explicit findings in the conclusion and additional details on the methodology to enhance transparency and credibility. I would like to offer some constructive feedback and suggestions to further enhance the quality and impact of your research:
1. Given the complexity of the topic, consider providing more definitions and explanations of technical terms and concepts related to DeFi, blockchain, and smart contracts. This would make the paper more accessible to a broader audience, including those who may be less familiar with these technologies.
2. To strengthen the credibility of your research, consider providing more details about the criteria and methodology used to select and analyze the 50 articles from the pool of 200. While this approach is reasonable for a comprehensive overview, it would be helpful to provide more details on the selection criteria and sources to ensure transparency in the research process.
3. While your categorization of risks is valuable, consider including real-world examples or case studies to illustrate these risks and their potential consequences in the DeFi ecosystem. This would make your findings more tangible and relatable.
4. To ensure a balanced discussion, consider addressing not only the risks associated with DeFi but also its advantages and potential benefits compared to traditional finance. This would provide a more holistic view of the topic.
The actual conclusions are not presented. A more explicit summary of the key findings and their implications would be beneficial.
5. Since your paper identifies various risks, consider offering practical recommendations or strategies for mitigating these risks within the DeFi ecosystem. This would provide actionable insights for stakeholders.
6. Expand your analysis to include the perspectives of various stakeholders in the DeFi ecosystem, such as investors, developers, regulators, and users. Understanding their viewpoints and concerns would enrich your research.
7. Given the societal impact of DeFi, consider exploring ethical and social considerations related to financial inclusion, privacy, security, and their implications for vulnerable populations.
I believe that addressing these points would significantly enhance the depth and relevance of your research.
1. There is some repetition of concepts and phrases. For example, the description of DeFi features is reiterated multiple times without adding new information. This redundancy can be condensed to improve clarity and conciseness.
2. Transition sentences between different sections are weak or missing. Clear transitions help guide the reader from one topic to another, enhancing comprehension.
3. Some sentences are overly complex and convoluted, making it challenging to understand the intended meaning. Simplifying the language would enhance clarity.
4. Transition to Figure 2: The passage mentions "Figure 2" without any prior context or explanation. Readers may be left wondering what Figure 2 represents. It should include a brief explanation or context about the figure.
5. The use of passive voice, such as "A further risk classification was developed," can make the writing less engaging. The active voice would be more direct and engaging.
6. The text states that "regulatory changes are exogenous and hence unmanageable." While true that DeFi creators cannot control regulatory changes, they can take proactive steps to adapt. This point could benefit from clarification.
7. Some grammar errors:
l Stablecoins backed by fiat currencies, (are backed)
l like as gold or oil. (as)
l such MakerDAO1 (such as)
l They are created when users lock their cryptocurrency into smart contracts that then enables them to be used by others. (enable)
l letting users to trade assets swiftly and easily (to)
l Market risk: which is the risk (This)
l While Werner et al. (2021) gives (give)
l A first systematic literature review about DeFi research (The first systematic literature review of DeFi research)
l Comprehensive risk assessments which also include economical
l Only recently, a first approach of a categorization of risks (on)
l Creation risks: Contract creation is an important step to implement smart contracts. (in implementing)
l There are some software transactional memory systems that helps to improve (help)
l the quantity of publications related to DeFi risks, (number)
l …
Author Response
Dear Reviewer,
We appreciate the time and substantial effort you invested in reviewing our paper. Your thorough analysis and constructive feedback have been incredibly valuable in enhancing the quality and coherence of our work.
The detailed and insightful comments provided a fresh perspective and guided us towards further clarification of our research. We are pleased to inform you that we have considered each point you raised and have incorporated most of the suggested amendments in the revised manuscript.
In light of your feedback, we have:
1. Expanded definitions and added explanations for technical concepts related to DeFi, blockchain, and smart contracts, aiming for accessibility and understanding across a varied readership.
2. Provided additional details regarding the methodology used to select and analyze the chosen articles.
3. Incorporated a balanced discussion on DeFi, highlighting not only its associated risks but also its advantages and potential benefits compared to traditional finance.
4. Enhanced the clarity, conciseness, and flow of our writing by revising repetitive phrases, improving transition sentences, and simplifying complex and convoluted sentences.
5. We extended our final discussion to include the perspectives of various stakeholders in the DeFi ecosystem like investors, developers, regulators, and users. Here we also explored first ethical and social considerations. However, further research is needed in this topic.
We deeply considered your valuable suggestion regarding the inclusion of practical recommendations or mitigation strategies for the identified risks within the DeFi ecosystem. While we acknowledge the significance and utility of such a section, we found that a thorough exploration of mitigation strategies would be quite extensive and may divert from the primary focus of the present paper. However, we recognize the importance of this aspect and have planned to dedicate a subsequent paper to this critical topic.
Thank you also for the suggestion to incorporate real-world examples and case studies to illuminate the risks within the DeFi sector. While we agree that such examples could enhance the applicability and tangibility of our findings, we believe that a detailed exploration of these instances would require a level of depth that extends beyond the scope and focus of the current paper.
We are committed to continuously refining our work and are thankful for the corrections in the quality of English language which have been addressed in the revised manuscript.
We have marked all adjustments from your and the other reviews in red in the attached version.
Thank you once again for your comprehensive review and suggestions. We believe that your inputs have significantly enriched the quality of our paper and we hope that the revisions will meet your approval.
Kind regards,
the authors
Author Response File: 
Author Response.pdf
Reviewer 2 Report
No comments.
Author Response
Dear Reviewer,
Thank you very much for dedicating your time to review our manuscript. We appreciate your efforts and are grateful for the approval without specific comments. Should any further thoughts or suggestions arise in the future that could enhance our work, we welcome them wholeheartedly.
Kind regards,
the authors
Reviewer 3 Report
The paper studies Decentralized finance (DeFi) and future applications. The uniqueness of this study is introducing the 'Risk Wheel' for DeFi. The paper interests me since it deals with future transaction styles such as Blockchain. They assess the risk associated with this advancement. Also, I like the methodology used in extracting from 96 papers the risk factors and how they assess them. However, the paper needs a major revision of the following points. The methodology of assessing the risk impact needs to be more apparent.
1. In Figure 1, how does the "Smart contract" score 29 from Table A1?
2. In Figure 2, yellow is the top ten risks. What is the meaning of other degree Blue colors (light to Dark)?
3. Figure 3 also has the same unclarity as Figure 2, which explains how the different risk colors are determined.
4. The word "chapter" in whole documents needs to be changed to "section" since this scientific paper not a theises or book.
Author Response
Dear Reviewer,
Thank you for taking the time to review our paper and for recognizing the uniqueness and potential of the 'Risk Wheel'. We sincerely appreciate your constructive feedback and express our gratitude for the specific points you've raised to enhance the clarity and quality of our work.
1. Regarding your query about the scoring of "Smart contract" as 29 in Figure 1 from Table A1, we realized that we need to clarify this. The numbers in Figure 1 come from the occurences in the papers. They are also counted a the end of the appendix table.
2 & 3. Your points about the color representations in Figures 2 and 3 are valid. In our revision, we included a detailed description that explains the colors and their implications.
4. We also appreciate your meticulous attention to detail regarding the use of the word "chapter".
We have marked all adjustments from your and the other reviews in red in the attached version.
Once again, we thank you for your valuable input and assure you that we will thoroughly address these points in our revisions. Your insights are instrumental in enhancing the precision and clarity of our research.
Kind regards,
the authors
Author Response File: Author Response.pdf
Reviewer 4 Report
The paper is outstanding in terms of the concept, the methodology and the contribution to the literature.
Very good attempt from the authors. Indeed, it is landmark in the classification and treatment of risk in finance.
Author Response
Dear Reviewer,
Thank you very much for dedicating your time to review our manuscript. We appreciate your efforts and are grateful for the approval. Should any further thoughts or suggestions arise in the future that could enhance our work, we welcome them wholeheartedly.
Kind regards,
the authors
Round 2
Reviewer 1 Report
Accept after minor revision (corrections to minor methodological errors and text editing)
Accept after minor revision (corrections to minor methodological errors and text editing)
Reviewer 3 Report
Thank you for your response. My comments were answered.
