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7 - DeFi and Next Generation of FinTech

from Part III - Applications and Use Cases of Web3

Published online by Cambridge University Press:  21 November 2024

Ken Huang ,
Youwei Yang ,
Fan Zhang ,
Xi Chen  and
Feng Zhu
Ken Huang
Affiliation:
DistributedApps.ai
Youwei Yang
Affiliation:
Bit Mining Limited
Fan Zhang
Affiliation:
Yale University, Connecticut
Xi Chen
Affiliation:
New York University
Feng Zhu
Affiliation:
Harvard Business School
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Summary

Chapter 7 highlights key concepts in Decentralized Finance (DeFi) and compares it to traditional finance. It discusses major DeFi applications such as decentralized exchanges, lending/borrowing platforms, derivatives, prediction markets, and stablecoins. DeFi offers advantages, including open access, transparency, programmability, and composability. It enables peer-to-peer financial transactions without intermediaries, unlocking financial inclusion, efficiency gains, and innovation. However, risks such as smart contract vulnerabilities, price volatility, regulatory uncertainty, and lack of accountability persist. As DeFi matures, enhanced governance, security audits, regulation, and insurance will be vital to address these challenges. DeFi is poised to reshape finance if balanced with prudence. Important metrics to track growth include total value locked, trading volumes, active users, and loans outstanding. Research tools such as Dune Analytics, DeFi Llama, and DeFi Pulse provide data-driven insights. Overall, DeFi represents a profoundly transformative blockchain application, but responsible evolution is key. The chapter compares DeFi to traditional finance and analyzes major applications, benefits, risks, and metrics in this emerging field.

Type
Chapter
Information
Web3
Blockchain, the New Economy, and the Self-Sovereign Internet
 , pp. 175 - 226
Publisher: Cambridge University Press
Print publication year: 2024

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