An Introduction to Decentralized Finance (DeFi)
Abstract
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.
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Blockchain; Decentralized Finance; DeFi; Smart Contracts
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DOI: 10.7250/csimq.2021-26.03
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Journal of Banking and Financial Technology year: 2022
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Copyright (c) 2021 Johannes Rude Jensen, Victor von Wachter, Omri Ross

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