Decentralized Finance (DeFi): A Review of Applications and Risks in the Financial Ecosystem

Abstract

Decentralized Finance (DeFi) represents a trans formative innovation in the financial ecosystem, leveraging block- chain technology to provide decentralized alternatives to traditional financial services. This paper provides a comprehensive review of DeFi applications, including lending, decentralized exchanges, stable-coins, and asset management. Furthermore, it examines the associated risks, such as security vulnerabilities, regulatory uncertainties, and systemic risks. The findings underscore the potential of DeFi to democratize finance while emphasizing the need for robust risk mitigation strategies.