Decentralization and Tokenization of Finance: Conceptual, Structural and Functional Features of DeFi

Abstract

The paper studies DeFi (decentralized finance) as a decentralized system for the circulation of financial tokens in virtual and cryptocurrency spaces. The subject of the study is the basic concepts, structures, and properties of DeFi. The relevance of the work is determined by the presence of unresolved issues related to the conceptual apparatus and structure of DeFi, factors of reduction and methods for determining the level of decentralization of DeFi, the functioning of the DeFi infrastructure, which highlights the need for further research into the concepts, structures and properties of DeFi. The aim of the study is to form a theoretical and methodological foundation for DeFi by clarifying the conceptual apparatus and identifying the features of DeFi functioning. The methodological framework of the study is based on the following principles: an object-subjective approach to describing entities, a method of structural analysis of objects, a systems approach to model objects, a process approach to analyzing the functioning of systems, and a service approach to analyzing interactions between serving and served systems. The study resulted in the formulation of the concept of DeFi (including the concept of a decentralized system). The following were identified: factors of centralization (reduced decentralization) of DeFi; the structure of DeFi as a set of subsystems for the circulation of virtual financial tokens and crypto tokens; a method for assessing the degree of DeFi decentralization as a system for the circulation of digital financial tokens; a three-tier service model of the DeFi infrastructure; and a model for the interaction of financial token circulation processes. Conclusions: The conceptual framework of DeFi, including the definition of DeFi as a decentralized system for the circulation of financial tokens in virtual and crypto spaces, allows us to identify the functional features of DeFi that ensure conditions for significantly greater transparency of the rules and results of financial transactions compared to traditional centralized financial systems. The use of virtual and crypto tokens, along with other DeFi mechanisms in financial circulation, significantly reduces uncertainty and the associated risks of executing financial agreements between economic entities.