DeFi – Potential, Advantages and Challenges

Svetoslav Borisov

Economic Studies journal, 2022, issue 4, 33-54

Abstract: Blockchain technology may decrease transaction costs, promote decentralised platforms and build distributed trust, paving the road to new business models. In the financial sector, blockchain technology approves the progress of more innovative, boundless and clear decentralised financial services. Decentralised financial services can broaden financial encompassment by promoting open access and innovation. By scraping out several restrictions, they reveal new opportunities for entrepreneurs and innovators. A year ago, the whole value locked in DeFi (Decentralised finance) systems was almost $600 million, and by May 2021, it was about $88 billion. The frantic development of the ecosystem requires newcomers to understand its basic characteristics. The purpose of this paper is to estimate the advances of decentralised finance, classify current business models, and outline potential challenges and constraints.

JEL-codes: D86 L14 O31 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:bas:econst:y:2022:i:4:p:33-54

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