  Decentralized financial (DeFi) applications on the Ethereum blockchain are
highly interoperable because they share a single state in a deterministic
computational environment. Stakeholders can deposit claims on assets, referred
to as 'liquidity shares', across applications producing effects equivalent to
rehypothecation in traditional financial systems. We seek to understand the
degree to which this practice may contribute to financial integration on
Ethereum by examining transactions in 'composed' derivatives for the assets
DAI, USDC, USDT, ETH and tokenized BTC for the full set of 344.8 million
Ethereum transactions computed in 2020. We identify a salient trend for
'composing' assets in multiple sequential generations of derivatives and
comment on potential systemic implications for the Ethereum network.
