The convergence of artificial intelligence (AI) and decentralized web technologies represents a pivotal shift in digital infrastructure, giving rise to the concept of AI-native protocols. These protocols integrate AI capabilities directly into their fundamental design, moving beyond mere application-level AI to create intelligent, adaptive, and autonomous decentralized systems. This paper explores the transformative potential of AI-native protocols in reshaping the decentralized web, often referred to as Web3. We delve into the architectural implications, key benefits such as enhanced security, efficiency, and scalability, and the profound societal impact of such a paradigm shift. Through a comprehensive literature review, we identify existing challenges in both AI and blockchain domains that AI-native protocols are uniquely positioned to address, including algorithmic bias, data privacy, and consensus mechanism inefficiencies. We propose a conceptual framework for designing these protocols, emphasizing core components like intelligent consensus, autonomous agents, and AI-powered smart contracts. Furthermore, the paper discusses the ethical considerations inherent in embedding AI within decentralized governance structures and outlines future research directions for fostering responsible innovation. Our findings suggest that AI-native protocols are not merely an incremental improvement but a foundational evolution that promises to unlock unprecedented levels of intelligence and autonomy across the decentralized digital landscape, fostering a more robust, equitable, and resilient internet.
Marko Štaka, Sonja Ristić, Miroslav Stefanović, Danilo Nikolić · 5 authors
Blockchain technology and smart contracts are central to decentralized applications. Operating on blockchain introduces challenges in design, development, and execution costs. On Ethereum, gas fees make optimization essential. This paper analyzes common mistakes affecting gas consumption and outlines strategies to improve efficiency. Using literature review and error systematization, key issues are identified and practical steps proposed. These recommendations, grounded in scientific research, aim to help developers design optimized and cost-effective smart contracts.
تناولت هذه الدراسة الفقهية مسألة المتاجرة بالرموز غير القابلة للاستبدال (NFTs)، وهي رموز رقمية فريدة تُسجَّل على تقنية البلوك تشين وتُستخدم لإثبات ملكية الأصول الرقمية. وهدفت الدراسة إلى بيان الحكم الفقهي لهذه المعاملات في ضوء القواعد العامة للمعاملات المالية في الشريعة الإسلامية، من خلال تحليل خصائص هذه الرموز ومجالات استخدامها، وبيان مدى انطباق الضوابط الشرعية على تلك المعاملات. وقد خلصت الدراسة إلى أن الحكم يتوقف على طبيعة كل حالة، حيث إن بعض صور المتاجرة بهذه الرموز قد تندرج تحت البيوع الجائزة، إذا توفرت فيها شروط الصحة وانتفت عنها المحاذير الشرعية؛ بينما بعض الصور الأخرى قد تُعد من المعاملات المحرمة، بسبب الغرر أو الجهالة أو المقامرة. وأوصت الدراسة بضرورة وضع أطر شرعية واضحة لتنظيم هذه المعاملات في ظل التطورات الرقمية المتسارعة. This jurisprudential study explores the issue of trading in Non-Fungible Tokens (NFTs), which are unique digital assets registered on blockchain technology and used to prove ownership of digital content. The study aims to determine the Islamic legal ruling on such transactions in light of the general principles of financial dealings in Islamic law, by analyzing the features of NFTs, their uses, and the extent to which they comply with Shariah standards. The study concludes that the ruling depends on the nature of each case. Some forms of NFT trading may be considered permissible sales if the necessary conditions are met and no Shariah violations are involved. However, other forms may be deemed prohibited due to uncertainty, ambiguity, or elements of gambling.
Globally, the construction industry is faced with several challenges like inefficiencies, disputes, and a lack of transparency. This paper uses the case of Lusaka, Zambia to investigate the impact of adopting emerging digital technologies in the construction industry, with a particular focus on smart contracts and blockchain technology. Drawing on existing literature and theoretical frameworks, Technology Acceptance Model (TAM), this paper argues that through the adoption of smart contracts and Blockchain technologies, the construction industry in Zambia and the world over could result in many benefits. Lusaka was an ideal case study for validating these hypothesized benefits. The findings of this research identified both benefits and challenges to the adoption of smart contracts and blockchain technologies. The identified benefits include the efficiency in construction processes, an improvement in the supply chain management, mitigation of risks, and a fostering of greater trust among stakeholders within the construction industry. Emerging from the research data were challenges relating to technological illiteracy, absence of regulatory frameworks, and high costs of initial investment. The paper concludes by emphasizing that the benefits surpass the challenges hence the need for Zambia and other similar developing economies to consider transforming the construction industry processes through adopting blockchain technologies and smart contracts to revolutionizing construction practices.
Hsi‐Peng Lu, Ya-Yuan Ku, Kuo‐Lun Hsiao, Wadee Alhalabi
With the rise of blockchain and decentralized technologies, doubts about traditional financial institutions' efficiency have increased. Meanwhile, Web3 offers transparency, security, and autonomy. However, the existing literature overlooks role the role of doubt as a push factor while focusing on the positive effects of trust. Moreover, the role of crypto wallets as a mooring factor remains underexplored. This study applies push-pull-mooring theory to examine Web3 literacy, trust in machines, doubt in institutions, and switching costs. Data were collected from 165 survey respondents. The results indicate that Web3 literacy increases doubt in traditional institutions but does not significantly affect trust in Web3. Additionally, switching costs moderate the relationship between Web3 literacy and doubt. When switching costs are low, doubt rises significantly. This study provides a new perspective on Web3 adoption, showing doubt's push effect and the role of push-pull mooring in migration, thus addressing gaps in the literature. Furthermore, the findings highlight how decentralized finance's trust mechanism is evolving, offering insights for Web3 adoption.
The objective of this article is to identify the impact of corporate investments in Bitcoin on the stability of the cryptocurrency market, with particular emphasis on the investment strategy of MicroStrategy (currently Strategy). The first section of the paper outlines the operational mechanisms of Bitcoin, including its consensus system and the blockchain technology that underpins its security and decentralisation. The second section examines the structure of the cryptocurrency market, identifying its key participants and the mechanisms driving its volatility and dynamics. The third section is dedicated to an analysis of MicroStrategy’s quarterly reports for 2023 to 2024. The final section presents the conclusions, which indicate that the company’s aggressive acquisition strategy is associated with significant financial risk. The analysed data suggest that continued exposure to the highly volatile cryptocurrency market may lead to serious challenges for the firm, potentially undermining its long‑term financial stability. Consequently, this may pose systemic risks to the broader cryptocurrency market, particularly by exerting substantial downward pressure on the supply side.
Parisa Bouzari, Maria Fekete-Farkas, Zsigmond Gábor Szalay
This research investigates the efficacy of transformer architectures in classifying sustainability claims made by cryptocurrency projects, addressing a critical gap in automated environmental impact assessment of digital assets. Employing design science research (DSR) methodology, we develop and empirically evaluate a novel framework comparing five state-of-the-art transformer models across multiple performance dimensions. Through rigorous analysis of 300 synthetic cryptocurrency sustainability news articles, we demonstrate that RoBERTa-large-MNLI achieves optimal performance (F1: 1.00) with exceptional prediction stability (0.98)—meaning highly consistent predictions across varied inputs—and minimal entropy (0.05)—indicating strong confidence in classification decisions—albeit at higher computational costs. Our findings challenge conventional assumptions about the inverse relationship between model complexity and prediction reliability in specialized financial domains. The results advance theoretical understanding of transfer learning in sustainable finance while establishing quantitative benchmarks for automated environmental claim verification. This research contributes to both academic literature and regulatory frameworks by providing empirically validated methodologies for distinguishing between substantive and symbolic environmental initiatives in cryptocurrency markets. The findings provide valuable guidelines for cryptocurrency projects, financial institutions, and regulatory bodies seeking to implement automated sustainability assessment systems, while establishing a foundation for future research in the intersection of artificial intelligence and sustainable finance.
We examine the qualifying attributes of decentralized finance (DeFi) as a financial asset class. To achieve this objective, we perform analysis on the relationship (using both level and percentage-change data) between DeFi valuation and selected influencing variables, namely total value locked (TVL), Bitcoin (BTC) value, and market variables. A suite of long-panel data econometric methods is employed on a multi-frequency (daily, weekly, and monthly) panel dataset comprising 16 major DeFi protocols from January 2022 to December 2023. Our empirical design aims to be a comprehensive assessment and triangulation. There are several key findings. First, while there is evidence of cointegration suggesting a possible long-run relationship, this relationship is found to be inconsistent across different variables and time frequencies. However, the impulse response analysis suggests that shocks from the influencing variables do not have a permanent impact. Second, Bitcoin value is found to be the most important influencing factor (positive and highly significant), reflecting strong cryptocurrency market sentiment and aligning with previous research on spillover effects from major cryptocurrencies (Șoiman et al., 2022; Yousaf et al., 2022).
Το Web3 δεν αποτελεί απλώς μια τεχνολογική εξέλιξη, αλλά μια ριζική μετατόπιση με βαθιές φιλοσοφικές προεκτάσεις. Οραματίζεται ένα Διαδίκτυο όπου οι χρήστες βρίσκονται στο επίκεντρο, χωρίς την ανάγκη ύπαρξης κεντρικής αρχής. Στόχος του είναι να διασφαλίσει ότι οι χρήστες έχουν την πλήρη ιδιοκτησία τόσο των δεδομένων που παράγουν όσο και της αξίας — οικονομικής ή πληροφοριακής — που προκύπτει από αυτά. Αυτή η μετάβαση σε ένα νέο τεχνολογικό υπόδειγμα βρίσκει εφαρμογή σε ποικίλους τομείς, όπως η Αποκεντρωμένη Αποθήκευση (Decentralized Storage), η οποία επιτρέπει ασφαλείς, κατανεμημένες λύσεις αποθήκευσης δεδομένων με αυξημένη ανθεκτικότητα στη λογοκρισία· τα Μη Ανταλλάξιμα Διακριτικά (Non-Fungible Tokens – NFTs), που εγγυώνται την ιδιοκτησία και την αυθεντικότητα ψηφιακών περιουσιακών στοιχείων· και τα Αποκεντρωμένα Παιχνίδια (Decentralized Gaming), τα οποία αξιοποιούν την τεχνολογία blockchain για να δημιουργήσουν οικονομίες που ανήκουν στους παίκτες, αποδεικτικά σπάνια ψηφιακά αγαθά και διαφανείς μηχανισμούς παιχνιδιού. Μαζί με πλήθος άλλων καινοτομιών, οι παραπάνω τεχνολογίες διαμορφώνουν τη νέα εποχή του Διαδικτύου. Όπως είναι αναμενόμενο, το Web3 έχει προσελκύσει το ενδιαφέρον της ερευνητικής κοινότητας, η οποία προσπαθεί να το θεμελιώσει εκ νέου, βασιζόμενη σε αναδυόμενες και ακόμη ανώριμες τεχνολογίες. Παράλληλα όμως, έχει κινήσει και το ενδιαφέρον κακόβουλων παραγόντων, που εκμεταλλεύονται τον πρώιμο χαρακτήρα και την πολυπλοκότητα αυτών των αλληλένδετων συστημάτων προς ίδιον όφελος. Η πρόκληση, επομένως, είναι να εξασφαλιστεί ότι η ασφάλεια θα εξελίσσεται παράλληλα με την ανάπτυξη του οικοσυστήματος του Web3, ώστε να μην εξελιχθεί σε ένα ασταθές ή εχθρικό περιβάλλον. Η συμβολή της παρούσας διατριβής σε αυτήν την προσπάθεια είναι πολυδιάστατη. Αρχικά, μελετούμε τη σχετική βιβλιογραφία σχετικά με την αλυσίδα συστοιχιών (blockchain) του Ethereum, τα NFTs και το Interplanetary File System (IPFS), το οποίο αποτελεί θεμελιώδες στοιχείο του επιπέδου αποθήκευσης δεδομένων του Web3, με στόχο τον εντοπισμό ευπαθειών και την ανάλυση του βαθμού ύπαρξης κακόβουλης δραστηριότητας. Στη συνέχεια, υιοθετώντας την οπτική των κακόβουλων χρηστών, εξετάζουμε πιθανούς τρόπους εκμετάλλευσης των παραπάνω τεχνολογιών και τεκμηριώνουμε πιθανούς διαύλους επίθεσης, ώστε να είναι ευκολότερος ο εντοπισμός και η αντιμετώπισή τους. Τέλος, προτείνουμε βελτιώσεις στον σχεδιασμό κρίσιμων υπηρεσιών του επιπέδου εφαρμογών του Web3, οι οποίες ενισχύουν τη διαθεσιμότητα και την επεκτασιμότητά τους, θέτοντας έτσι τα θεμέλια για πιο ανθεκτικές, επεκτάσιμες και μελλοντικά βιώσιμες αποκεντρωμένες εφαρμογές.
This study presents a systematic literature review (SLR) conducted under the PRISMA 2020framework to investigate the convergence of two transformative paradigms: Generative ArtificialIntelligence (GenAI) and Web3. The findings indicate that, while each technology independentlydrives digital transformation, their integration remains underexplored. GenAI advancesinnovation through algorithmic creativity, personalization, and automated content generation,whereas Web3, enabled by blockchain, smart contracts, non-fungible tokens (NFTs), anddecentralized autonomous organizations (DAOs), introduces decentralized mechanisms of trust,transparency, and digital ownership. Current research addressing the intersection of thesedomains is fragmented and predominantly conceptual, leaving critical gaps in trust mechanisms,governance structures, operational models, and legal frameworks.To address these gaps, this study proposes the conceptual AIChain Framework: a unifiedplatform that integrates GenAI-powered content generation, automated tokenization, trustengines, and decentralized marketplaces. This architecture demonstrates cross-sectoral potentialin creative industries, FinTech, and education by linking algorithmic creativity withdecentralized ownership. The contributions are threefold: (1) at the theoretical level, the studysynthesizes the Resource-Based View (RBV), the Dynamic Capabilities View (DCV), the digitaltrust framework, and the information interaction model to establish a foundation for analyzingGenAI–Web3 convergence; (2) at the practical level, it introduces an operational architecture fornext-generation platform development; and (3) at the policy and governance level, it highlightsthe need for transparent, auditable, and participatory models to prevent technological oligopolies.By bridging theoretical insights with practical implications, this research provides a roadmap forfuture scholarship and industry practice, including pilot implementations of the AIChainframework, the design of hybrid governance models, and the assessment of ethical andenvironmental implications surrounding GenAI–Web3 convergence.
The regulation of cryptocurrency presents a major challenge to financial governance in emerging economies such as Tanzania. The rapid growth of virtual assets, their decentralized nature, and potential for anonymity have raised significant concerns regarding money laundering, terrorist financing, and consumer protection. Internationally, the Financial Action Task Force (FATF) has established standards that require member states to regulate Virtual Asset Service Providers (VASPs) through licensing, supervision, and compliance with Anti–Money Laundering and Counter–Terrorist Financing (AML/CFT) measures. This article critically analyses the Tanzanian legal and institutional framework governing cryptocurrency in light of these international standards. It argues that although Tanzania has made preliminary steps such as recognizing digital assets under the Finance Act, 2024 and issuing public notices through the Bank of Tanzania there remains a significant regulatory gap in achieving full FATF compliance. The study concludes that comprehensive legislation is required to address the legal status of virtual assets, enhance regulatory oversight, and foster a balance between innovation and financial integrity.
Cross-border remittances are important sources of financial support for families, especially in developing countries, facilitating access to basic human necessities like education and healthcare. In spite of their stability through international crises like COVID-19, and India being the largest recipient in 2024, conventional remittance systems based on SWIFT and Correspondent Banking persist with high costs, lagged processing times, and low transparency. This paper suggests a blockchain-based remittance platform that overcomes these limitations by removing intermediaries, facilitating real-time peer-to-peer transfer through automation of smart contracts. The platform makes use of stablecoins to provide volatility resistance. Secure custodial wallets, as well as strict KYC/AML compliance, provide user authentication and regulatory compliance. The designed architecture improves speed, lowers the cost of transactions, and provides regulatory trust—showing a scalable, secure, and inclusive alternative to traditional remittance systems.
This paper does an in-depth analysis of how blockchain technology and smart contracts instill public confidence in the banking industry. For a very long time now, trust in monetary transactions has been cemented through honest businesses and a regulated intermediary. As it would later turn out, blockchain technology provides an un-hackable, transparent, and decentralized basis upon which trust is built. In this bid to cut the involvement of third parties, this study analyzes to what extent blockchain technology and smart contracts facilitate a shift in trust to programmable contracts. Basically, this essay goes into detail about how blockchain technology and smart contracts can be applied with a view to reconsidering the very concept of trust. This study adopted a mixed-method approach in order to determine useful use cases and evaluate their contribution toward data security, transaction speed, and making sure of confidence. Case studies that are included in this study include but are not limited to JP Morgan's Quorum blockchain technology. According to many studies, blockchain technology cuts transaction costs by enhancing security and transparency, hence encouraging innovation in new financial services and products. This page contributes to the growing debate on decentralized technology through the provision of relevant insight into the legislators, regulators, and financial institutions leading this technological revolution.
Francesco Salzano, Simone Scalabrino, Rocco Oliveto, Remo Pareschi
Smart Contracts are critical components of blockchain ecosystems, with Solidity as the dominant programming language. While LLMs excel at general-purpose code generation, the unique constraints of Smart Contracts, such as gas consumption, security, and determinism, raise open questions about the reliability of LLM-generated Solidity code. Existing studies lack a comprehensive evaluation of these critical functional and non-functional properties. We benchmark four state-of-the-art models under zero-shot and retrieval-augmented generation settings across 500 real-world functions. Our multi-faceted assessment employs code similarity metrics, semantic embeddings, automated test execution, gas profiling, and cognitive and cyclomatic complexity analysis. Results show that while LLMs produce code with high semantic similarity to real contracts, their functional correctness is low: only 20% to 26% of zero-shot generations behave identically to ground-truth implementations under testing. The generated code is consistently simpler, with significantly lower complexity and gas consumption, often due to omitted validation logic. Retrieval-Augmented Generation markedly improves performance, boosting functional correctness by up to 45% and yielding more concise and efficient code. Our findings reveal a significant gap between semantic similarity and functional plausibility in LLM-generated Smart Contracts. We conclude that while RAG is a powerful enhancer, achieving robust, production-ready code generation remains a substantial challenge, necessitating careful expert validation.
Once a playground for tech enthusiasts, the crypto space has shifted to a financial field that is increasingly on policymakers’ radar due to the increasing adoption of crypto-assets, and also some significant crypto-related collapses. In this context, it is crucial to propose monitoring frameworks to assess the potential integration of the crypto sphere into traditional financial systems. We propose the use of the TVP-VAR approach as a strategic instrument for policymakers to analyze the connectedness between major financial markets and relevant crypto systems, such as the emerging centralized finance sector and the increasingly relevant decentralized finance ecosystem. Our findings indicate that the financial integration between the crypto space and traditional financial markets remains weak. Nonetheless, we report a very slight increase in connectedness since 2020, suggesting that while the crypto space is still far from being fully integrated, it has begun to establish modest but persistent links with conventional financial markets. • We examine dynamic connectedness between crypto and global equity markets. • TVP-VAR shows crypto–TradFi integration remains weak but rising since 2020. • DeFi and broad crypto indices transmit more spillovers than Bitcoin or CeFi. • Results highlight regulatory priority on DeFi and full-market monitoring.
The study explores the impact of non-fungible tokens on asset liquidity within the decentralized finance system, based on a systematic review of thirty articles retrieved from major scholarly databases. We analyzed how NFTs contribute to increasing liquidity and facilitate a shift in digital asset ownership. Findings show NFTs improve asset liquidity by permitting fractional ownership and trade of assets that were previously illiquid, like real estate and digital art. NFTs’ unique characteristics and market volatility may make them less liquid. Blockchain technology that underpins NFTs offers transparent and unchangeable ownership records. The ramifications show how developers, investors, and regulators may take advantage of NFTs’ while resolving obstacles, including scalability problems and regulatory uncertainty.
Jyoti Neeli, Vijaya Shetty S, N. N. Srivastava, K. Venkatesh Sharma · 5 authors
The Solana blockchain serves as the foundation for the Finance (DeFi) Lending Protocol. The proposed protocol seeks to address the high fees and sluggish transaction speeds of current Ethereum-based protocols by utilizing Solana's high throughput and low-latency infrastructure. Among our contributions are a real-time interest rate model, improved liquidation logic, and a novel lending pool mechanism. According to experimental results, fees are lowered by more than 90% and transaction speeds are increased by 85% when compared to Ethereum- based systems. According to the results, DeFi protocols based on Solana are ideally suited for extensive financial applications.
Abstract In order to design an ideal financial infrastructure, we must preserve the benefits of modern monetary system while effectively utilizing innovative technologies. The current system, with its two-tiered structure of a central bank and commercial banks, supports market-based financial intermediation and elastic supply of money. This is underpinned by the fractional reserve system, banks’ credit creation, banking regulation and deposit insurance. Given that retail Central Bank Digital Currencies (CBDCs) and stablecoins could impact the functions of this modern monetary system, discussions around them often overlap with the “narrow banking” debates of the 20th century. Based on these considerations, tokenized deposits have been developed to maintain the advantages of the two-tiered monetary system while integrating blockchain and distributed ledger technology. Since both digital currencies and digital assets are forms of “digital tokens” that adopt common technologies, it is crucial to establish seamlessly-connected platforms for comprehensively handling transactions of both digital currencies and digital assets.
Over the past decade, the surge in popularity of cryptocurrency investment has garnered a lot of attention in the financial marketplace. This study aims to open the “black box” of cryptocurrency investors by understanding the past cryptocurrency investors’ characteristics. Specifically, we investigated the relationship between cryptocurrency investment investors and their characteristics, such as levels of financial literacy, as proxied by both subjective and objective financial knowledge measures, investment experience, and investment knowledge. We apply the logistic regression model to the data from the most recent cohort of the National Financial Capability Study 2021 (NFCS21). We find that investment experience and investment knowledge are the important factors related to investing in cryptocurrency among the characteristics examined. Surprisingly, we also find that individuals with higher education are less likely to become cryptocurrency investors. Finally, the present study reveals an interaction effect between age and investment knowledge, showing that the linkage between cryptocurrency investment and investment knowledge is stronger for younger investors with an age between 18 and 34 than for those above 44. This paper contributes to the existing literature on cryptocurrency investment by revealing the personal characteristics that categorize a cryptocurrency investor. This paper also extends the existing conceptual framework about cryptocurrency by showing that sociodemographic factors, such as age could moderate the linkage between investment knowledge and cryptocurrency investment.
Innovation has long shaped economic growth and welfare, but in banking and finance it generates a paradox: while hailed as revolutionary, it often proves fragile and rarely displaces incumbents. This dissertation investigates how FinTech and blockchain innovations could disrupt the organizational structures and dynamics of financial networks, focusing on competition, governance, and trust.The second chapter (as the first is the introduction) examines FinTech through the lens of industrial economics. Using an extended Hotelling model and original data from CIFRE company Shine, it shows that although FinTech entrants offer low-cost, mobile-native services, they struggle to achieve profitability and rarely threaten banks' market share. Traditional institutions adapt their strategies and preserve positive market share and profits, highlighting the structural resilience of incumbents and the persistent challenges faced by newcomers. This study achieves the notable contribution of offering a quantitative measure of the gap that prevents FinTechs from reaching profitability. This chapter thus provides new theoretical and empirical evidence on how geography and network structures shape competitive dynamics in modern banking, while also highlighting the persistent challenges FinTechs face in achieving profitability.The third chapter addresses blockchain as a more radical institutional innovation. Unlike FinTech firms, blockchain is not a new competitor but an alternative governance mechanism that challenges the central role of banks. Drawing on transaction cost economics (TCE theory), the analysis conceptualizes blockchain, smart contracts, and decentralized autonomous organizations (DAOs) as hybrid governance forms positioned between markets and firms. These structures reduce some transaction costs but face inherent limitations in price discovery, adaptability, and enforcement, thereby reshaping rather than replacing financial institutions. This chapter contributes both to a better understanding of blockchain networks through the lens of transaction cost economics (TCE) and to the development of TCE theory itself by introducing a new hybrid form of governance.The fourth chapter study to the question of trust. While blockchain is built on “trustless” cryptographic systems, empirical analysis of major Decentralized Finance (DeFi) protocols shows that social and reputational dynamics remain indispensable. A Social Network Analysis (SNA) of DAO governance forums reveals hierarchical patterns, reputation effects, and off-chain trust systems that supplement algorithmic trust. This chapter therefore provides evidence into multi-level trust formation in blockchain networks and DAOs, showing that while blockchain replaces some institutional functions with cryptographic mechanisms, social and reputational dimensions remain essential to sustaining decentralized governance.Together, these findings challenge the narrative of imminent creative destruction in financial services. FinTech and blockchain foster important transformations, yet their disruptive impact is constrained by market structures, institutional dynamics, and the persistent need for social trust. By combining theoretical modelling, empirical evidence, and network analysis, this dissertation contributes to a nuanced understanding of how financial innovations evolve, not as outright replacements of traditional institutions, but as complex reconfigurations within existing networks.
MakerDAO is a decentralized lending protocol providing crypto-backed loans with no intermediaries, backed by volatile assets such as Ethereum (ETH). Loans are liquidated if the value of the collateral dips below a threshold. DeFi compared to traditional finance does not have standardized risk models and default is difficult to model. Earlier models such as Poisson Process and Brownian Motion have the unrealistic premise of constant volatility, which makes them less useful in rapidly fluctuating crypto markets. This paper introduces a Geometric Brownian Motion (GBM) model with rolling volatility to capture real-time market dynamics. The model learns to adapt to prevailing price trends by estimating volatility with a rolling window and enhances the accuracy of default risk estimation. Results indicate that rolling volatility increases the predictive ability of GBM, providing a robust solution to credit risk management in DeFi platforms. The GBM with rolling volatility has 0.006 root mean square error and 0.008 mean absolute error.
Muh. Rapi, Muh. Hanif, Ghifary Duyufur Rohman, Mukhtar Arif Siraj
Purpose This paper aims to review the perspectives and views of modern scholars on decentralized finance (DeFi) and assess the alignment of DeFi platforms and concepts with fundamental Islamic principles. The goal is to ensure that DeFi adapts to Islamic principles, maintaining the relevance of maqasid syariah within the evolving financial technology landscape. Design/methodology/approach This research uses a qualitative methodology using sentiment analysis to evaluate 133 academic articles retrieved from the Scopus database. Sentiment extraction and analysis were performed using ATLAS.ti software to analyze the scholarly discourse on DeFi from an Islamic perspective. Findings The findings of this study indicate that 59% of the studied texts exhibit positive sentiments toward DeFi, reflecting academic confidence in its potential advancements and benefits for the financial sector. Neutral sentiments constitute 25% of the responses, acknowledging both the opportunities and challenges DeFi poses. In contrast, 16% of the texts express negative views, emphasizing the need for a cautious approach to their broader implications. From an Islamic perspective, DeFi is generally permissible under the fiqh muamalah principle, provided it adheres to Sharia principles. This study suggests that implementing DeFi in financial institutions can enhance the equitable distribution of funds and resources, increase transparency and reduce transaction costs, thereby improving community welfare and economic inclusion. However, challenges in regulation and risk management necessitate cooperation among key players. Research limitations/implications This research is significant, as it offers a foundational understanding of DeFi’s potential within Islamic finance, guiding future innovations and regulatory frameworks in this emerging field. This study highlights the importance of aligning DeFi developments with Islamic principles to foster equitable and inclusive financial growth while addressing regulatory and risk management challenges. Originality/value To the best of the authors’ knowledge, this research is the first study to conduct sentiment analysis of the scientific literature on DeFi from an Islamic perspective, providing a novel viewpoint on the intersection of DeFi and Islamic principles.