Decentralized Finance (DeFi)

Defi is a broad category of smart contracts which loosely correspond to digital investment schemes running on a blockchain which allow users to create overcollateralized loans out of stablecoin and which have side payouts in so-called "governance tokens".

DeFi generally refers to a collection of services which offer lending products offered by non-banks and which exist outside the regulatory perimeter as a form regulatory arbitrage and to fund margin trading activities to speculaate on crypto assets.

See also yield farming, AMM, DEX and shadow bank.


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  15. Qin, Kaihua, Liyi Zhou, Yaroslav Afonin, Ludovico Lazzaretti, and Arthur Gervais. 2021. ‘CeFi vs. DeFi – Comparing Centralized to Decentralized Finance’. ArXiv Preprint ArXiv:2106.08157.
  16. Saengchote, Kanis. 2021. ‘A DeFi Bank Run: Iron Finance, IRON Stablecoin, and the Fall of TITAN’. IRON Stablecoin, and the Fall of TITAN (July 16, 2021).
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  18. Sun, Xiaotong. 2021. ‘Centralized Governance in Decentralized Finance (DeFi): A Case Study of MakerDAO’. SSRN Electronic Journal.
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