Decentralized finance research and developments around the World

Peterson Ozili

MPRA Paper from University Library of Munich, Germany

Abstract: Decentralized finance is financial services offered on a public blockchain over the internet. This paper reviews the decentralized finance (DeFi) research and development around the world. The findings of the literature review are that decentralized finance offers many benefits such as broadening financial inclusion; encouraging permission-less innovation; eliminating the need for intermediaries; ensuring the immutability of transactions; censorship resistance and making cross-border transactions cheaper. The associated risks include execution risk in smart contracts, legal liability risk, data theft risk, interconnectedness risk, external data risk, and greater propensity for illicit activity using DeFi applications. The review of existing DeFi research show that there are few studies on DeFi, and a large number of DeFi research studies are non-empirical studies. Most studies hold a positive view about DeFi. They emphasize the benefits of DeFi in great depth but the challenges of DeFi were not analysed in great depth, and there are no critical studies on DeFi. Observations on DeFi developments from around the world show that there is growing interest in decentralized finance in Europe, U.S., Asia and Oceania. There are concerns that regulating decentralized finance can impede growth in decentralized finance markets in Asia. There are also concerns that banning crypto assets can hinder the growth of decentralized finance in African countries where regulators do not fully permit blockchain-enabled cryptocurrencies. Several policy issues associated with DeFi are discussed. Areas for further research are provided to advance the literature on decentralized finance.

Keywords: decentralized finance; DeFi; blockchain; ethereum; cryptocurrency; distributed ledger technology; protocol; token; total valued locked; smart contract; digital currency; literature review. (search for similar items in EconPapers)
JEL-codes: G21 G24 G28 O31 O38 (search for similar items in EconPapers)
Date: 2022
New Economics Papers: this item is included in nep-ban, nep-fdg, nep-fle, nep-fmk, nep-pay and nep-sea
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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