A multivocal literature review of decentralized finance: Current knowledge and future research avenues

Abstract

While decentralized finance (DeFi) has the potential to emulate and, indeed, outperform existing financial systems, it remains a complex phenomenon yet to be extensively researched. To make the most of this potential, its practitioners must gain a rigorous understanding of its intricacies, as must information systems (IS) researchers. Against this background, this study uses a multivocal literature review to capture the state of research in DeFi. Thereby, we (1) present a consolidating definition of DeFi as we (2) analyze, synthesize, and discuss the current state of knowledge in the field of DeFi. We do so while adapting the blockchain research framework proposed by (Risius and Spohrer, Business & Information Systems Engineering 59:385–409, 2017). Furthermore, we (3) identify gaps in the literature and indicate future research directions in DeFi. Even though our findings highlight several shortcomings in DeFi that have prevented its widespread adoption, our literature review shows a large consensus on DeFi’s many promising features and potential to complement the traditional financial system. To that end, this paper is presented to encourage further research to mitigate the current risks of DeFi, the payoff of which will be an enriched financial ecosystem.

Research on Decentralized Finance Lending Protocols: A Case Study of Compound

“…The locked-in collateral assets are automatically recovered when the borrower pays back the borrowed money and interest. Due to the volatility of the price of the collateral asset, if the price falls below the loan level threshold, the borrower will be required to cover the position or the smart contract will be triggered to automatically liquidate, at which point the borrower will retain the loan but lose the collateral asset [15]. In other words, if the borrower's borrowing capacity is insufficient, its collateral will be sold at auction to pay off the debt.…”

Value creation and capture in decentralized finance markets: Non-fungible tokens as a class of digital assets

“…As part of the Fintech movement, DeFi, a decentralized platform ecosystem in which financial services are provisioned by multiple market participants, intermediaries, and end users in a more decentralized way, came into existence (Eikmanns et al, 2023;Zetzsche et al, 2020). Blockchain-based DeFi integrates emerging technology into finance to create better services for users, thereby improving the entire financial services industry (N.-P. Chen et al, 2021;Gramlich et al, 2023;Popescu, 2020). DeFi also focuses on removing intermediaries by creating peer-to-peer connections in financial markets (Y.…”

A descentralização das finanças

“…A maioria dos estudos chega à conclusão de que não. O mais provável é que os dois sistemas coexistam e tenham intersecções 10 . As instituições financeiras tradicionais podem, por exemplo, integrar as criptomoedas no sistema de pagamentos, criar e gerenciar smart contracts e tokens próprios.…”