Decentralized Autonomous Organizations (DAOs) have emerged as the de facto governance layer for major decentralized finance (DeFi) protocols and real-world asset (RWA) tokenization platforms, yet they operate in a profound legal and regulatory vacuum. Unlike traditional financial entities, DAOs lack formal legal personality, fiduciary duties, or mechanisms for regulatory accountability, despite managing assets estimated at $25 billion globally as of 2024. This research examines how DAOs are transforming financial governance and identifies the necessary regulatory adjustments to ensure investor protection, market integrity, and systemic resilience without compromising the core innovation of decentralized coordination. Through a mixedmethods approach-including governance mapping of 30+ financial DAOs, comparative legal analysis of emerging regulatory responses (from the EU's MiCA framework to Wyoming's DAO LLC statute), and semi-structured interviews with developers, regulators, and institutional participants-the study proposes a novel "functional equivalence" model for DAO regulation. This model grants legal recognition to DAOs when they engage in regulated financial activities, while preserving code-based autonomy in non-regulated functions. The research offers a pragmatic pathway toward aligning decentralized innovation with public accountability, filling a critical gap in both academic literature and policy design.
This study presents a comprehensive systematic review of Artificial Intelligence (AI) applications in DecentralizedFinance (DeFi), emphasizing AI’s pivotal role in mitigating the vulnerabilities and operational complexities inherentin permissionless financial systems. By systematically analyzing 39 peer-reviewed studies from major scholarlydatabases, the review identifies five dominant application domains: fraud detection, smart contract security, marketprediction, credit risk assessment, and decentralized governance. It examines the diverse range of AI methodsspanning machine learning, deep learning, graph neural networks, and reinforcement learning—and evaluates theircomparative performance and limitations. The findings reveal that AI not only enhances DeFi’s transparency, trust,and efficiency but also underpins emerging capabilities such as autonomous governance and adaptive marketmechanisms. Persistent challenges including data scarcity, cross-chain generalization, interpretability, andscalability—underscore the need for robust, explainable, and ethical AI solutions. The review concludes that AIconstitutes a foundational enabler for secure, transparent, and resilient decentralized financial ecosystems, andoutlines critical future research directions for integrating trustworthy intelligence into the evolving DeFi landscape. (PDF) A Systematic Review on the Application of Artificial Intelligence in Decentralized Finance. Available from: https://www.researchgate.net/publication/397514996_A_Systematic_Review_on_the_Application_of_Artificial_Intelligence_in_Decentralized_Finance [accessed Nov 11 2025].
This article explores the potential of investments in the cryptocurrency segment, focusing on the factors driving this resurgence, the evolving landscape of decentralized finance (DeFi), and the long-term prospects for investors. Decentralized finance has emerged as one of the most promising sectors within the cryptocurrency ecosystem. By leveraging smart contracts and blockchain technology, DeFi platforms offer financial services without intermediaries, enabling users to lend, borrow, trade, and invest with unprecedented ease and transparency. The year 2023 marked a significant turning point for the cryptocurrency market, as it emerged from what many had dubbed the "cryptowinter." The cryptowinter of 2022 was triggered by a combination of macroeconomic challenges, including rising interest rates, inflationary pressures, and the collapse of major crypto entities like FTX. This period, characterized by declining asset prices, reduced investor sentiment, and widespread uncertainty, tested the resilience of both the industry and its participants. These events led to a loss of trust among retail and institutional investors alike. However, as the cryptowinter waned, new opportunities began to surface, revealing the untapped potential of investments in the cryptocurrency segment. Yet, as 2023 unfolded, the market demonstrated remarkable recovery capabilities. Despite market downturns, institutions continued to explore blockchain technology. In 2023, we witnessed greater participation from traditional financial players, such as banks and hedge funds, who recognized the transformative potential of cryptocurrencies and DeFi.
Decentralized Finance (DeFi) has emerged as a revolutionary paradigm in the global financial ecosystem, challenging the conventional banking systems by utilizing blockchain technology and smart contracts. This paper explores the rise of DeFi, its foundational principles, and its impact on traditional financial systems. DeFi eliminates the need for intermediaries such as banks, enabling peer-to-peer financial services such as lending, borrowing, trading, and asset management. By leveraging decentralized protocols, DeFi offers greater financial inclusion, transparency, and security, while providing users with complete control over their assets. The paper critically evaluates the advantages of DeFi, including reduced transaction costs, faster processing times, and the democratization of financial services. It also highlights the challenges and risks, such as regulatory uncertainty, scalability issues, and security vulnerabilities that could hinder widespread adoption. Furthermore, the review examines key DeFi applications, such as decentralized exchanges (DEXs), liquidity pools, and stablecoins, that are reshaping financial practices. While DeFi holds the potential to disrupt traditional banking by providing innovative alternatives, it also raises concerns related to market volatility and the lack of consumer protection. The paper concludes by reflecting on the future of DeFi, including its integration with mainstream finance and the regulatory frameworks that may shape its evolution. As DeFi continues to gain traction, understanding its potential and limitations is essential for policymakers, financial institutions, and participants in the global financial markets.
Purpose: The present paper aims to analyse the new financial system related to cryptocurrency and its challenges. Methodology: This paper primarily employs a literature review and quantity methodology to elucidate the emerging financial paradigm, hindrances, and policy considerations. Findings: The findings indicate that cryptocurrency can transform the financial landscape. Moreover, the data reflects that the transactions of different cryptocurrencies are increasing. Conclusion: The global payment system is experiencing significant changes due to cryptocurrency and the implementation of blockchain technology. It contends with challenges like price fluctuations and security threats. Further research is needed to understand the implementation of cryptocurrency as a common currency and its effects. Keywords: Bitcoins, Cryptocurrency, Digital Economy, Blockchain technology, Peer to Peer and Bitcoin
Andrew Ifesinachi Daraojimba, Damodar Bihani, Grace Omotunde Osho, Julius Olatunde Omisola · 6 authors
Decentralized Autonomous Organizations (DAOs) represent a transformative innovation in financial governance, enabling community-owned and transparently operated structures through blockchain technology. This paper presents a conceptual model for integrating DAOs into the banking and financial services sector to promote equitable, trustless, and decentralized financial systems. Traditional banking frameworks often rely on centralized authorities, opaque governance, and profit-driven agendas that marginalize underserved populations. By contrast, DAOs offer a paradigm where smart contracts execute predefined rules without intermediaries, allowing stakeholders to participate directly in decision-making processes. The proposed model outlines a framework for community-owned banking, emphasizing the use of token-based governance, peer-to-peer lending mechanisms, automated interest rate adjustments, and decentralized reserve management. This system fosters financial inclusion by allowing unbanked and underbanked populations to access financial services through open and transparent digital platforms. Moreover, DAO-based financial governance ensures real-time auditability, accountability, and resistance to single points of failure—addressing critical vulnerabilities in conventional financial institutions. Through the conceptualization of a DAO-led Community Bank (DAO-CB), the paper demonstrates how decentralized finance (DeFi) primitives such as liquidity pools, stablecoins, and collateralized lending can be integrated with democratic governance models to create robust, community-led economic ecosystems. Legal, technical, and regulatory considerations are examined, with a focus on scalability, compliance, and user adoption challenges. The study argues that while DAO banking may not yet replace centralized financial institutions, it serves as a powerful complementary system, especially in regions with limited banking infrastructure or high levels of financial distrust. The research contributes to the growing discourse on decentralized finance and its real-world applications, offering insights into how DAOs can redefine ownership, control, and transparency in the financial sector. The conceptual model provides a foundation for future empirical studies and prototype development, encouraging stakeholders, developers, and policymakers to collaborate on building decentralized, equitable, and resilient financial ecosystems.
Introduction. This article explores the emerging role and importance of decentralized finance (DeFi) within the global financial landscape. It analyzes how blockchain-based financial instruments are reshaping traditional financial services and creating new opportunities for inventors and users worldwide. Summary of the main results of the study. The study begins by examining the core principles of DeFi, including its decentralized nature, transparency, and programmability. It then delves into the various components of the DeFi ecosystem, such as decentralized exchanges, lending platforms, and yield farming protocols, explaining their functions and potential benefits. The author investigates the growth trajectory of DeFi is addressing inefficiencies in traditional finance, particularly in areas like cross-border transactions, access to credit, and financial inclusion for the unbanked population. Furthermore, the article also critically assesses the challenges facing DeFi, including regulatory uncertainties, smart contract vulnerabilities, and scalability issues. It explores potential solutions and ongoing developments aimed at overcoming these obstacles. This the research analyzes the impact of DeFi on established financial institutions and markets. It considers how traditional banks and investment firms are responding to the DeFi phenomenon, either by adapting their services or by integrating DeFi elements into their existing operations. The study concludes by projecting the future role of DeFi in the international financial market. It discusses potential scenarios for the coexistence or convergence of centralized and decentralized financial systems, and the implications for global economic stability and financial inclusion. Conclusion. This comprehensive analysis provides valuable insights into the transformative potential of decentralized finance and its growing significance within the broader context of the international financial market.
Liquidity pools are essential for the functioning of decentralised finance. Nevertheless, the legal issues they raise have found little attention in legal scholarship. This article explains how liquidity is provided in decentralised finance, as opposed to centralised finance, and introduces the relevant stakeholders (i.e., DEX operators, liquidity providers, and traders). Then, it explores the legal relationships between such stakeholders from a contract law perspective. Further, it discusses the options of users to seek compensation in case they incur damage in connection with the use of decentralised finance platforms. Finally, it sets out the limitations of the existing legal framework and the need for legislative action. -- Liquiditätspools sind für das Funktionieren des dezentralen Finanzwesens unerlässlich. Trotzdem finden die rechtlichen Fragen, die sie aufwerfen, in der Rechtswissenschaft nur wenig Beachtung. Dieser Beitrag erläutert die Art und Weise, wie im dezentralen Finanzwesen - im Gegensatz zum zentralen Finanzwesen - Liquidität bereitgestellt wird, und stellt die relevanten Akteure (d.h. Betreiber von dezentralen Börsen DEX, Liquiditätsanbieter und Händler) vor. Anschliessend werden die rechtlichen Beziehungen zwischen diesen Akteuren aus vertragsrechtlicher Sicht untersucht. Ferner werden die Möglichkeiten der Benutzenden erörtert, Schadenersatz zu verlangen, wenn ihnen im Zusammenhang mit der Nutzung dezentraler Finanzplattformen ein Schaden entsteht. Schliesslich werden die Grenzen des bestehenden Rechtsrahmens und der Bedarf an gesetzgeberischen Massnahmen aufgezeigt. -- Si les liquidity pools sont essentielles au bon fonctionnement de la finance décentralisée, les questions juridiques qu'elles suscitent n'ont trouvé que peu d'attention en doctrine. La présente contribution présente la manière par laquelle la liquidité est assurée dans la finance décentralisée, par opposition à la finance traditionnelle, et présente les acteurs pertinents (opérateurs d'échanges décentralisés DEX, fournisseurs de liquidité et traders). Elle expose ensuite les relations juridiques entre les différents acteurs sur le plan contractuel. Puis, elle examine les possibilités pour les utilisateurs ayant subi un préjudice dans le cadre de l'utilisation d'échanges décentralisés de demander la réparation du dommage. Enfin, elle expose les limites du cadre juridique existant et la nécessité d'une action législative.
This article offers a clear and approachable introduction to the evolving landscape of money and the frictions developing between traditional government control and decentralized finance (DeFi). Tailored for readers with a basic awareness of cryptocurrency but limited familiarity with its broader implications, the article demystifies DeFi by explaining its core concepts including blockchain, Centralized Bank Digital Currencies (CBDCs), and the historical role of government regulation of money through central banking. Against this backdrop, it examines the transformative potential of DeFi, emphasizing the growing tension between the centralized authority of governments and the decentralized ideals driving this new financial model. While governments seek to maintain stability and control, individuals increasingly gravitate toward the more affordable, efficient, and inclusive solutions promised by DeFi. Designed to empower readers with a better grasp of the forces shaping the future of finance, this article underscores the importance of understanding the delicate interplay between governmental oversight and decentralized innovation. As the digital economy expands, this dynamic struggle will influence not only economic policies but also person-al financial choices and access to resources.
The forced digital transformation of the banking industry and monetary policy were a response to the growing trend of increasing adoption of decentralized finance. The transition from traditional, physical forms of money and payment systems to digital currencies and blockchain technology represents a significant shift in the financial landscape. This transition is characterized by the development of unique, nonreplicable assets, which define cryptocurrencies and other forms of digital assets. These assets are actively responding to the rapid changes in financial markets and represent a major development in monetary systems. The introduction of central bank digital currencies (CBDCs) represents a key event in this transformation, and their potential as monetary policy instruments should not be overlooked. Governments around the world are addressing the challenges of implementing these new currencies and ensuring their transparency, while also considering their potential benefits for economic stability. This study will explore the current state of CBDC development and its implications for the future of monetary systems. By analyzing the motivations for CBDC initiatives, the challenges of integrating these digital currencies into existing financial systems, and their implications for international payments, privacy, and security, this study reveals the multifaceted consequences of this technological development. The research is based on an examination of global CBDC projects, identifying successful implementations and the diverse approaches taken by various countries. Ultimately, this article emphasizes the importance of international cooperation and the establishment of a regulatory framework in order to benefit from the potential benefits of CBDC while mitigating the associated risks.
The 2008-2009 global financial crisis resulted in a loss of trust in traditional financial systems and the need to decentralize and democratize finance. This coincided with the birth of blockchain technology, marked by creating the pioneer cryptocurrency, bitcoin (BTC), in 2009. As blockchain technology has gained prominence, decentralized finance (DeFi) has emerged, transforming the financial landscape and offering financial services without the need for traditional financial intermediaries. While the disruption of traditional finance has opened up new opportunities, it has also introduced significant risks to the financial sector. In this study, we follow the PRISMA approach (systematic literature review) to identify several DeFi benefits and challenges, as discussed in the existing literature. Based on the Scopus database, we critically scrutinized 64 published articles to report that although DeFi promotes financial inclusion and enhances financial transparency and accountability, the ecosystem also faces security issues, regulatory ambiguities, and price volatility. By providing a balance between the benefits and risks associated with DeFi, this study will help investors and other stakeholders make informed decisions and will serve as a valuable resource for formulating strategies to better regulate the DeFi ecosystem.
Ramesh Cherinelli, D Marlene Garace Verghese, Ananda Kumar Reddy, K. Parijatha · 5 authors
This study investigates the integration of blockchain technology in financial systems, with a specific emphasis on Decentralized Finance (DeFi) and its implications for traditional banking practices. The research examines the fundamental principles of blockchain and its application in creating decentralized financial ecosystems. Through a comprehensive analysis of current DeFi platforms, protocols, and use cases, the study explores the potential benefits and challenges associated with this emerging technology. Key areas of investigation include smart contracts, decentralized lending and borrowing, yield farming, and asset tokenization. The paper also evaluates the regulatory landscape surrounding DeFi and its potential impact on established financial institutions. By comparing DeFi's operational efficiency, accessibility, and transparency with traditional banking systems, this research aims to provide insights into the future of finance and the potential for blockchain to revolutionize global financial in-frastructure. The findings indicate that while DeFi presents significant opportunities for financial innovation and inclusion, it also poses challenges related to security, scalability, and regulatory compliance that must be addressed for widespread adoption.
Decentralized Finance (DeFi), a financial ecosystem without centralized controlling organization, has introduced a new paradigm for lending and borrowing. However, its capital efficiency remains constrained by the inability to effectively assess the risk associated with each user/wallet. This paper introduces the 'On-Chain Credit Risk Score (OCCR Score) in DeFi', a probabilistic measure designed to quantify the credit risk associated with a wallet. By analyzing historical real-time on-chain activity as well as predictive scenarios, the OCCR Score may enable DeFi lending protocols to dynamically adjust Loan-to-Value (LTV) ratios and Liquidation Thresholds (LT) based on the risk profile of a wallet. Unlike existing wallet risk scoring models, which rely on heuristic-based evaluations, the OCCR Score offers a more objective and probabilistic approach, aligning closer to traditional credit risk assessment methodologies. This framework can further enhance DeFi's capital efficiency by incentivizing responsible borrowing behavior and optimizing risk-adjusted returns for lenders.
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.
T Abhishek, M S Chandan, G Darshan, G Vyshnavi · 5 authors
In the evolving world of technology and digital assets, Non-fungible tokens (NFTs) have emerged as a ground-breaking innovation. These digital assets represent ownership of unique intangible items and hold significant value. Unlike cryptocurrencies such as Ethereum or Bitcoin, NFTs are indivisible and cannot be exchanged on a one-to-one basis due to their unique nature. New financial services and opportunities are created for artists, creators, and buyers through the introduction of NFTs. The proposed approach aims to revolutionize financing in a decentralized marketplace by utilizing NFTs generated from digital arts. The NFT lending system can enable owners to leverage their assets as collateral for loans. This process eliminates intermediaries, thereby resulting in liquidity being unlocked. This work’s main focus is on Viz., the design and implementation of an NFT lending system, detailing the mechanisms for valuation, risk assessment, and smart contract deployment. The system ensures transparency, security, and trustless transactions by employing DeFi protocols. This state-of-the-art method automates borrower-lender interactions through smart contracts while securely storing data using blockchain technology. Smart contracts play a key role in executing lending agreements and collateral transfers within predefined parameters. By leveraging the Ethereum blockchain, this project aims to provide consumers with access to a platform offering a wide range of financial services. This study entails how NFT lending and borrowing are managed through smart contracts, ensuring secure and trustworthy transactions.
Ch Sree Kumar, Akhilendra Pratap Singh, K. Hemant Kumar Reddy
Distributed Ledger Technology (DLT) is a decentralized database system where transactions are recorded and verified across multiple nodes. Its key features include immutability, time-stamping, and consensus-based validation. Numerous DLT applications are in supply chain management, intellectual property, cross border payments, energy trading, real estate, and online donations. DeFi, a combination of cryptocurrency and blockchain technology, offers financial services without intermediaries. Hence transactions with various digital assets based on cryptocurrency price feeds needs an automated framework. Smart contracts, self-executing contracts with terms directly written into code, automate processes and reduce manual intervention. This paper proposes a decentralized financial trading model using the AAVE protocol. AAVE is a decentralized platform that allows for transactions with various digital assets based on cryptocurrency price feeds. Proposed model uses Chainlink, a decentralized oracle network, to provide accurate and reliable price feeds. IPFS is used for data storage, while Graph is employed for indexing and querying blockchain data. The paper presents an example of a DeFi protocol to simulate banking operations, showcasing the potential of DeFi and DLT in revolutionizing traditional banking processes.
ABSTRACT This paper provides a first economic analysis of liquid staking tokens, which are derivatives representing a share of staked tokens in Proof‐of‐Stake blockchains. We document substantial time‐variation in the “liquid staking basis” as given by the price difference between a derivative staking token and its underlying cryptocurrency. We find evidence that staking rewards, concentration risks, limits to arbitrage, and behavioral factors influence this basis. The liquid staking basis is wider when the yields offered by the liquid staking protocol are low relative to the alternative of staking directly, when cryptocurrency returns are more volatile, and when secondary market liquidity is low. In contrast, it is smaller when investors pay more attention to liquid staking and when investor sentiment is positive. Furthermore, liquid staking tokens contribute a significant and overall growing amount to price discovery in the underlying cryptocurrencies.