The Emerging World of Decentralized Finance

Abstract

Decentralized finance (DeFi) is the term used to describe financial applications and services built on blockchain, the technology behind cryptocurrencies. DeFi uses blockchain as a trust mechanism, enabling unknown parties to transact with each other, removing unnecessary intermediaries, and lowering transaction costs. In order to seize the potential of blockchain technology in this particular industry and how it can be translated into other niches, it is necessary to understand its mechanics, implications, and particularities. This paper aims to present the operating principles, technologies, and security implications related to blockchain-based decentralized finance.