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


1. Deciphering DeFi: A Comprehensive Analysis and Visualization of Risks in Decentralized Finance
Tim Weingärtner, Fabian Fasser, Pedro Reis Sá da Costa, Walter Farkas
Journal of Risk and Financial Management  vol: 16  issue: 10  first page: 454  year: 2023  
doi: 10.3390/jr


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Copyright (c) 2021 Johannes Rude Jensen, Victor von Wachter, Omri Ross

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