An Introduction to Decentralized Finance (DeFi)

Johannes Rude Jensen, Victor von Wachter, Omri Ross


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.


Blockchain; Decentralized Finance; DeFi; Smart Contracts

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DOI: 10.7250/csimq.2021-26.03


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