A Closer Look Into Decentralized Finance
The Emerald Handbook on Cryptoassets, Forthcoming
24 Pages Posted: 29 Apr 2022
Date Written: February 24, 2022
Decentralized finance (DeFi) is a technological infrastructure built on a blockchain networking environment that supplies transparent, uncensorable, and decentralized financial services and products. This infrastructure offers the opportunity to replicate traditional financial instruments on a decentralized platform and incorporate added features provided by blockchain technology. It also allows creating new instruments native to blockchain technology unavailable through traditional financial institutions. This chapter presents an in-depth analysis of the inner workings of stablecoins, decentralized exchanges, automated market makers, liquidity pools, decentralized lending, synthetic instruments, and asset management. It also provides specific examples for each application and presents some current challenges the sector faces.
Keywords: Decentralized finance (DeFi), stablecoins, decentralized exchanges, automated market makers, liquidity pools, decentralized lending, synthetic instruments.
JEL Classification: G10, G20, G30
Suggested Citation: Suggested Citation