A financial system that is built on blockchain technology with an aim to remove intermediaries like banks and financial institutions during financial transactions. DeFi protocols allow users to borrow, lend, trade, and invest assets directly with each other, often using smart contracts.
Published in Chapter:
Revolutionizing Finance With Decentralized Finance (DeFi)
Copyright: © 2024
|Pages: 24
DOI: 10.4018/979-8-3693-1532-3.ch006
Abstract
Decentralized finance is an innovative use of blockchain technology in financial services. Because of its transparency and lack of intermediaries, it brings several advantages to the traditional finance ecosystem. Features like tokenization, total value locked (TVL), oracles, and data aggregation help in building a variety of DeFi products and services. Decentralized apps (dApps) run autonomously atop distributed ledger networks. Decentralized stablecoins, decentralized exchanges (DEX), decentralized credit and lending, derivates, and even decentralized insurance are offered on DeFi platforms. The chapter takes through three forms of decentralized insurance models. Case studies and examples for successful and unsuccessful claims are explored. However, the implementation of DeFi comes with its challenges and regulatory hurdles. Similarly, governance and security aspects are of increased importance.