An Introduction to Decentralized Finance (DeFi)

Decentralized financial applications (DeFi) are a new breed of consumer-facing financial applications composed as smart contracts, deployed on permissionless blockchain technologies. In this article, we situate the DeFi concept in the theoretical context of permissionless blockchain technology and p...

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Bibliographic Details
Published inComplex systems informatics and modeling quarterly no. 26; pp. 46 - 54
Main Authors Jensen, Johannes, Von Wachter, Victor, Ross, Omri
Format Journal Article
LanguageEnglish
Published Riga Technical University Press 30.04.2021
Subjects
blockchain
decentralized finance
defi
smart contracts
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ISSN2255-9922
2255-9922
DOI10.7250/csimq.2021-26.03

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Summary:Decentralized financial applications (DeFi) are a new breed of consumer-facing financial applications composed as smart contracts, deployed on permissionless blockchain technologies. In this article, we situate the DeFi concept in the theoretical context of permissionless blockchain technology and provide a taxonomical overview of agents, incentives and risks. We examine the key market categories and use-cases for DeFi applications today and identify four key risk groups for potential stakeholders contemplating the advantages of decentralized financial applications. We contribute novel insights into a rapidly emerging field, with far-reaching implications for the financial services.
ISSN:2255-9922
2255-9922
DOI:10.7250/csimq.2021-26.03