A Closer Look Into Decentralized Finance

The Emerald Handbook on Cryptoassets, Forthcoming

24 Pages Posted: 29 Apr 2022

See all articles by Hugo Benedetti

Hugo Benedetti

ESE Business School - Universidad de los Andes, Chile

Sebastián Labbé

Karlsruhe Institute of Technology

Date Written: February 24, 2022

Abstract

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

Benedetti, Hugo E and Labbé, Sebastián, A Closer Look Into Decentralized Finance (February 24, 2022). The Emerald Handbook on Cryptoassets, Forthcoming , Available at SSRN: https://ssrn.com/abstract=4069011 or http://dx.doi.org/10.2139/ssrn.4069011

Hugo E Benedetti (Contact Author)

ESE Business School - Universidad de los Andes, Chile ( email )

Av. La Plaza 1905
San Carlos de Apoquindo, Las Condes
Santiago
Chile

Sebastián Labbé

Karlsruhe Institute of Technology ( email )

Kaiserstraße 12
Karlsruhe, Baden Württemberg 76131
Germany

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