Blockchain and Decentralized Finance: Assessment of Risks, Opportunities, and Innovative Monetary Systems

This PhD thesis examines risks, opportunities and socio-technical innovation in blockchain-based financial systems, combining network analysis, empirical market data, and institutional analysis. As the crypto ecosystem and decentralized financial infrastructures continue to expand and interact with traditional monetary systems, understanding how risk propagates across assets, platforms, and institutional designs has become increasingly important for market participants and policymakers. The first two chapters focus on systemic risk in crypto assets (cryptocurrencies and stablecoins) using a network-based approach. The first paper analyzes major crypto assets and constructs dynamic networks based on return co-movements to study the evolution of interconnectedness and contagion risk over time. Network centrality measures (degree, closeness, betweenness, and eigenvector) are used to identify systemically important nodes (cryptocurrencies and stablecoins) and to assess how these measures affect their systemic risk contributions, particularly during market stress episodes. Results showed that the systemic risk contribution of crypto assets decreases over time as their connectedness in the system increases. This impact is more pronounced for cryptocurrencies than for centrally issued, managed, and governed stablecoins. Our findings suggest that pure network interconnectedness plays a diminished role in tail risk propagation in the crypto market. The second paper extends this framework to token pairs traded on centralized and decentralized exchanges (CEXs and DEXs), allowing for a comparison of market structure and risk transmission across trading platforms. By incorporating data from CEXs and DEXs, this chapter highlights differences in network topology and the role of liquidity concentration in shaping systemic risk. Results showed that centrality values significantly impact systemic risk contribution of token pairs listed on centralized exchanges. Conversely, insignificant results were found for all token pairs traded on decentralized exchanges. The token pairs on centralized exchanges exhibited a negative association with centrality values, consistent with the findings reported in the first paper. These findings imply that systemic risk in cryptocurrency markets is not solely driven by interconnectedness, but by how that interconnectedness is structured. In particular, the negative relationship between centrality and systemic risk suggests that higher network integration, supported by transparency and decentralized architectures, may enhance risk sharing and reduce systemic vulnerability. These results highlight the potential of blockchain based financial systems to contribute to more resilient, efficient, and inclusive financial ecosystems, while also offering new insights for the design of risk management and regulatory frameworks. The third paper shifts the focus from market level risk to protocol level risk management in leading Decentralized Finance (DeFi) lending platforms. It examines the determinants of liquidation events and evaluates the effectiveness of protocol design features as risk management tools. Exploiting the transition from earlier to newer protocol versions across different blockchain layers, the empirical analysis employs panel fixed effect regression models to assess how changes in risk control measures 3 affect liquidation dynamics and protocol’s performance. The findings emphasize that protocol level design choices play a critical role in mitigating risk beyond asset price volatility alone. The architectural evolution from v2 to v3, characterized by granular risk parameters, isolation modes, and enhanced risk management mechanisms has systematically improved protocol resilience, with liquidations in v3 serving as positive signals of stability rather than distress. The fourth paper broadens the scope of the thesis by examining blockchain based complementary currencies in comparison with traditional complementary currency systems, with a particular focus on their potential role in universal basic income schemes. It investigates the socio-technical evolution of Complementary Currencies for Basic Income using a data-driven approach to different case studies (Fiat and Blockchain based models). It highlights how technological choices influence scalability, transparency, and risk exposure in social and monetary innovations by employing mix method approach. Finally, based on the trade-offs of each system, a hybrid model for UBI is proposed for financial inclusion and poverty elimination. Taken together, the four papers provide an integrated perspective on risks and opportunities in emerging financial ecosystems, spanning asset markets, trading infrastructure, decentralized protocols, and alternative monetary arrangements. Overall, the results suggest that the core features of blockchain based markets, e.g., decentralization, transparency, accessibility, low transaction costs and automated risk management, are not merely technological innovations but may serve as mechanisms for improving system resilience and inclusive financial architectures. This thesis also contributes to the literature by demonstrating how network structures and institutional design jointly shape systemic risk and resilience in DeFi, offering insights relevant for researchers, protocol designers, and policymakers navigating the evolving digital financial landscape.