Template-Type: ReDIF-Article 1.0

Author-Name: Tamás Katona
Author-Workplace-Name: Magyar Nemzeti Bank
Author-Email: katonat@mnb.hu


Title: Decentralized Finance - The Possibilities of a Blockchain "Money Lego" System

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.

Classification-JEL: G10, G15, G20, G23, G24, G28
Keywords: blockchain, decentralized finance, Ethereum, crypto-assets, smart contract, yield farming, liquidity mining
Pages: 74-102
Volume: 20
Issue: 1
Year: 2021
File-URL: https://en-hitelintezetiszemle.mnb.hu/letoltes/fer-20-1-st3-katona.pdf
File-Format: Application/pdf
Handle: RePEc:mnb:finrev:v:20:y:2021:i:1:p:74-102