Technologies Behind Crypto-Based Decentralized Finance

Abstract

A new breed of consumer-facing financial applications called decentralized financial applications (DeFi) is structured using smart contracts and runs on permissionless blockchain technologies. In this chapter, the authors contextualize the DeFi idea within the theoretical framework of blockchain and related technologies and their potential real-world applications. In addition, the authors looked at the basic DeFi concepts and application scenarios for DeFi today and pinpointed distributed ledger technologies, artificial intelligence, machine learning, and zero-knowledge proofs as the three key technologies that help revolutionize DeFi. The authors concluded that blockchain is the foundation of DeFi, and AI and ML capabilities help organizations deliver crypto insights to their users to cope with the market volatility, and zero-knowledge proofs ensure the security of digital transactions in an unregulated, decentralized finance world.