The EU Blockchain Observatory and Forum published a new report on Decentralised Finance (DeFi)
Providing a foundation of understanding Decentralised Finance as the fastest growing blockchain innovation
MAY 26, 2022 – Decentralised Finance (DeFi) has emerged as a blockchain-based form of finance that leverages innovations in cryptocurrencies and smart contracts to build fair, inclusive, and robust financial systems that do not rely on central financial intermediaries. The European Blockchain Observatory and Forum (EUBOF) has just published a report that takes a dive into this financial system that powers Web 3.0 crypto economy, offering an introduction to Decentralised Finance and explaining DeFi applications that allow people lend, borrow and trade financial assets without intermediaries.
The EUBOF report, coordinated by the Institute for the Future (IFF) at the University of Nicosia, offers a comprehensive review of the fast-evolving blockchain innovation of Decentralizing Finance, which can be considered as a subset of FinTech. The report studies the similarities and differences of DeFi and traditional or conventional finance (TradFi) in four (4) main areas: Intrinsic characteristics, functional differences, operational differences and the regulatory landscape.
The figure below showcases some differences between TradFi and DeFi:
In addition, the report highlights the prominent applications in the DeFi ecosystem. These applications include:
- Stablecoins: a type of cryptocurrency aiming to address the volatility of cryptocurrencies and constitute a blockchain-native unit of account.
- Decentralised lending and borrowing: among the first DeFi applications to gain popularity, decentralised lending and borrowing are simply transactions of transferring and returning cryptocurrencies at a fixed or variable interest rate which use smart contracts.
- DEXes - Decentralised exchanges: cryptocurrency exchanges where transactions occur directly between crypto traders.
- DeFi 2.0 or notable DeFi concepts: The emerging DeFi concepts, namely, derivatives, insurance and the collection of novel applications.
The EUBOF team, with the Institute For the Future (IFF) of the University of Nicosia leading the scientific team, have produced the report, which, included notable contributors such as Alexi Anania, Íñigo Moré, Marcin Pawłowski, Matthew Niemerg, Amit Joshi, Miquel Gouarré Baró, Iwona Karasek-Wojciechowicz, Stefan Loesch and Daniel Szegö.
Professor George Giaglis, IFF’s Executive Director stated: “DeFi is a novel and fast-growing area of financial services, and this report outlines key areas of the DeFi ecosystem which represents a paradigmatic shift in financial services provisioning and promises to be one of the most disruptive applications of blockchain-fueled decentralisation. We are proud to have worked with the European Commission and our partners at EUBOF to produce this report that helps the reader learn more about the fundamentals of DeFi, its underlying technologies and the prominent applications in the revolutionary world of DeFi.”
To read the full report, visit: https://www.eublockchainforum.eu/reports/decentralised-finance
The EU Blockchain Observatory and Forum is a European Commission initiative to accelerate blockchain innovation and the development of the blockchain ecosystem within the EU and so help cement Europe’s position as a global leader in this transformative new technology.
Tonia Damvakeraki, EU Blockchain Observatory and Forum, E-mail: email@example.com
Marianna Charalambous, Institute For the Future, E-mail: firstname.lastname@example.org