Author information:
Tamás Katona: Magyar Nemzeti Bank, Analyst. E-mail: katonat@mnb.hu
Abstract:
With the adoption of blockchain technology, initiatives to provide financial, investment and insurance services to a wide range of users in a decentralized manner have emerged. But can decentralized finance be the alternative to the traditional financial system, or has it only created another “technology playground” for users who are biasedly enthusiastic about crypto-assets? The study examines the key definitions of decentralized finance and then synthesizes them to formulate a new, more complete definition. This is followed by a presentation of the different layers of decentralized finance and their prevalence, as well as an analysis of its benefits and risks. In the conclusions, the author finds that decentralized finance has the potential to provide financial services with an open, transparent and robust infrastructure, and has the possibility of reaching a broad range of users with its basic financial services. However, this requires further development of the sector and effective management of emerging risks.
Cite as (APA):
Katona, T. (2021). Decentralized Finance – The Possibilities of a Blockchain “Money Lego” System. Financial and Economic Review, 20(1), 74–102. https://doi.org/10.33893/FER.20.1.74102
Column:
Study
Journal of Economic Literature (JEL) codes:
G10, G15, G20, G23, G24, G28
Keywords:
blockchain, decentralized finance, Ethereum, crypto-assets, smart contract, yield farming, liquidity mining
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