Managing Risk in DeFi
J. R. Jensen and O. Ross, “Managing Risk in DeFi” in CEUR Workshop Proceedings, Aachen 2020
6 Pages Posted: 18 Feb 2021 Last revised: 10 Mar 2021
Date Written: 2020
Decentralized financial application (DeFi) are a new type of consumer-facing financial application composed of as ‘smart contracts’ deployed on a permis- sionless blockchain. We situate the DeFi concept in the theoretical context of permissionless blockchain and provide a taxonomical overview of agents, in- centives and risks in DeFi applications. We identify four key risks with rele- vance for managers, practitioners and scholars contemplating a proactive en- gagement with decentralized financial applications. We contribute new founda- tional insights into a rapidly emerging field with far-reaching implications for consumer finance.
Keywords: DeFi, Blockchain Smart Contracts, Decentralized Finance
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