Decentralized Finance (DeFi): An Emergent Alternative Financial Architecture

Chohan, Usman W.

doi:10.2139/ssrn.3791921

Cited by 34 publications

(27 citation statements)

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“…Regarding the challenges of decentralized finance, Zetzsche et al (2020) argue that decentralized finance has the potential to undermine traditional forms of accountability and erode the effectiveness of traditional financial regulation and enforcement. Chohan (2021) argues that while decentralized finance prioritizes disintermediation and decentralization to empower individuals along crypto-anarchist principles, it has substantial difficulties such as market manipulation, distortionary incentives, excess short-termism, encouraging Ponzi-schemes, and money-laundering challenges. Wharton (2021) shows that while decentralized finance can promote efficiency, transparency, innovation, and financial inclusion, decentralized finance also presents serious concerns such as greater potential for fraud, cyber-attacks, and decentralized finance governance problems.…”

Section: Defi Literaturementioning

confidence: 99%

Decentralised Finance and Cryptocurrency Activity in Africa

Ozili¹

2022

The New Digital Era: Digitalisation, Emerging Risks and Opportunities

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This paper presents a discussion of decentralized finance in Africa. It presents some statistics and data on decentralized finance in Africa. Thereafter, the potential benefits, challenges and regulatory issues associated with decentralized finance in Africa are discussed. Recently, there has been an increase in the use of cryptocurrency, decentralized finance applications (dApps) and decentralized financial services (DeFi) in several countries. These innovations facilitate the delivery of financial services using smart contracts. Decentralized finance (DeFi) encompasses all financial services that are built on public blockchains, based on open protocols and removes intermediaries from the financial intermediation process. There is significant cryptocurrency activity in Africa while decentralized finance (DeFi) is relatively new and unpopular in the African continent. There is low interest in decentralized finance in Africa. The benefit of DeFi to African countries include increased liquidity for small and medium scale enterprises (SMEs), new opportunities to raise additional capital to fund capital-intensive activities, it will usher in an era of smart contracts that are negotiated bilaterally without needing an intermediary, it will encourage peer-to-peer trade between economic agents in several African countries, it will enhance the efficiency of the Pan-African Payment Settlement System (PAPSS), and encourage more trade between individuals and corporations under the African Continental Free Trade Agreement (AfCFTA), amongst others.

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Section: Defi Literaturementioning

confidence: 99%

Decentralised Finance and Cryptocurrency Activity in Africa

Ozili¹

2022

The New Digital Era: Digitalisation, Emerging Risks and Opportunities

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“…The Ethereum protocol is by far the most popular technology used by DeFi proponents (Chohan, 2021) and that is reflected by the value of total capital deployed to the DeFi system or "the total value of crypto-assets locked (TVL) in smart contracts" (Katona, 2021, p.84).…”

Section: Originsmentioning

confidence: 99%

“…These problems may then be amplified by the fact that no counterparty can be held responsible as the system is anonymous and permissionless (Zetzsche, Arner, & Buckley, 2020). It is even conceivable that perpetrators intentionally use such characteristics to scam credulous investors (Chohan, 2021).…”

Section: Disadvantages Of Defimentioning

confidence: 99%

“…Instead, financial services should be provided by users for users by deploying software in a decentralized manner throughout a peer-to-peer network, yet without counterparty risk (Schär, 2021). DeFi thus seeks to enable users as individuals to financially interact with each other, let that be through lending-borrowing, asset speculation, diversification, earning returns or obtaining insurance without intermediaries (Chohan, 2021). DeFi can therefore be seen as a natural continuation of the Fintech trajectory that not only permits new and more agile organizations to enter areas that were previously reserved to licensed credit institutions, but these neophytes also deliver a greater diversity of products, more inclusivity, transparency and improved risk management (Mention, 2019).…”

Section: Introductionmentioning

confidence: 99%

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DeFi: Decentralized Finance - An Introduction and Overview

Schueffel

2021

jim

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DeFi, short for decentralized finance, is a new paradigm that enjoys increasing popularity in the financial world. DeFi posits that financial services should not rely on centralized intermediaries but should be provided by users for users. This is done by deploying software components to a decentralized peer-to-peer system which is grounded on blockchain technology. This introductory text discusses the origins of DeFi and delineates DeFi characteristics from those of traditional finance. Several examples of DeFi applications are given, the disadvantages resulting from this paradigm are discussed, and an outlook is provided.

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“…Uniswap [11] Built on the Ethereum blockchain, Uniswap serves as an exchange for hundreds of Ethereum-based digital tokens, and its algorithm creates dynamic additional payment structures for users to form liquidity pools by compensating them for trading fees. It allows users anywhere in the world to trade crypto without any intermediaries.…”

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confidence: 99%

A Review on Applications of Blockchain in Banking Sectors

Bhattacharya¹,

Bhattacharjee²

2022

IJEAST

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In the banking and financial service domain, blockchain technology can make business process less complex while creating safe, trustworthy records of agreements and transactions. Public's huge support in Digital Ledger Technology & blockchain's decentralized control can shift user trust from humans to machines. Decentralized Finance will grow more & more so applying it to banking sectors might be very useful to get more people on board with this new technology. It also has the potential to solve traditional banking problems of lending money, trusting government & bank authorities etc. The time needed to process various tasks such as tax filing , insurance , bank transactions of large amounts will be heavily reduced. Crypto is our future & with the help of Smart Contracts , DAO , DeFietc we can flourish our banking sectors for the general public.

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Decentralized Finance (DeFi): An Emergent Alternative Financial Architecture

Cited by 34 publications

References 0 publications

Decentralised Finance and Cryptocurrency Activity in Africa

Decentralised Finance and Cryptocurrency Activity in Africa

DeFi: Decentralized Finance - An Introduction and Overview

A Review on Applications of Blockchain in Banking Sectors

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