Understanding decentralized finance
how DeFi is changing the future of money
- ISBN: 9781398609372
- Editorial: Kogan Page Ltd.
- Fecha de la edición: 2023
- Lugar de la edición: London. Reino Unido
- Encuadernación: Rústica
- Medidas: 24 cm
- Nº Pág.: 272
- Idiomas: Inglés
Understanding Decentralized Finance demystifies DeFi, locating the integration points between decentralized and centralized finance to help finance professionals unlock valuable opportunities.
DeFi - the next evolution of cryptocurrency - has brought a new wave of investors into the world of finance. As fintechs and financial institutions seek to integrate with DeFi, this book explores its history, its present context, and its future. It explains the world of DeFi by comparing it to the traditional finance sector, highlighting points of similarity, difference and integration.
Understanding Decentralized Finance explores the technologies underlying the DeFi market and how they differ from those of traditional financial markets. It scrutinizes the difference between centralized and decentralized cryptocurrency exchanges, how NFTs fit into DeFi and how collectibles can be financialized. Readers will also find out how collateralized loans, derivatives, margin trading and liquidity provision work in a world where there is no centralized institution to coordinate these activities - and how regulators in different jurisdictions are ensuring that financial regulations keep up with these innovations.
Too good to be true?
What is decentralized finance?
How the financial system evolved
Cryptocurrency: the foundational building block of DeFi
How Bitcoin works
Ethereum and smart contracts
Why is decentralization important
and is it achievable?
How mainstream are cryptocurrencies and DeFi?
Legacy banks and institutions move into the space
The cryptocurrency bear market
Managing risk within the DeFi system
References
Further reading 01 Why DeFi developed and how it works
Cultural movements and low returns on investment
Developments that enabled the growth of DeFi
The NFT boom
DeFi: finance without a central authority
Key moments in the evolution of DeFi
The DeFi summer of 2020
Beyond Ethereum: other Layer 1 networks
References
02 The current face of retail finance
Retail customers and their attitude to risk
Why this book focuses on DeFi for retail customers
Demographics and retail investment
The rise of the finfluencer
The most-used financial services
Riskier investments Banks or technology companies?
Fintech × DeFi
Wallstreetbets, meme stocks and crypto meme culture
Opportunities and challenges
References
03 Decentralized exchanges: the start of DeFi
Centralized crypto exchanges
Hacks and fraud
The decentralization dream
Automated market makers and liquidity pools
'Pump and dump' tokens
Forked codebases and vampire attacks
Non-Ethereum DEXs
NFT exchanges
What is a wallet?
Wrapped Bitcoin
What else can you do with DeFi?
References
04 Beyond DEXs: other DeFi protocols
Staking
Loans Decentralized lending protocols
Composability
Gamified savings projects
Borrowing
Democratizing finance
More complex loans
Derivatives
Perpetuals
Options
Insurance
Creating your own financial instruments
Institution-focused initiatives
Evaluating risk
Further reading
05 Risks and challenges
Blockchain-specific challenges
Governance risks
Insufficient decentralization
Maximal extractable value and front-running
Open-source code and its liabilities
Audits do not offer guarantees
Hacks, heists and other disasters Knowledge and education challenges
Risks around technology and integration
Product challenges
Systemic risk
The future of DeFi as an integral part of the financial system
Insurance, bug bounties and audits
Conclusion
References
Further reading
06 DAOs: decentralized autonomous organizations
What is a DAO and how does it differ from traditional company models?
The history of DAOs
Collaboration in pursuit of a common goal
The 2016 DAO hack and its impact
DAOs for different purposes
DeFi DAOs: Uniswap and Compound
Legal liability and legal standing
