SoK: Decentralized Finance (DeFi)

Decentralized Finance (DeFi), a blockchain powered peer-to-peer financial system, is mushrooming. Two years ago the total value locked in DeFi systems was approximately 700m USD, now, as of April 2022, it stands at around 150bn USD. The frenetic evolution of the ecosystem has created challenges in u...

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Bibliographic Details
Published inarXiv.org
Main Authors Werner, Sam M, Perez, Daniel, Lewis Gudgeon, Klages-Mundt, Ariah, Harz, Dominik, Knottenbelt, William J
Format Paper Journal Article
LanguageEnglish
Published Ithaca Cornell University Library, arXiv.org 15.09.2022
Subjects
Computer Science - Cryptography and Security
Cryptography
Finance
Quantitative Finance - Economics
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Summary:Decentralized Finance (DeFi), a blockchain powered peer-to-peer financial system, is mushrooming. Two years ago the total value locked in DeFi systems was approximately 700m USD, now, as of April 2022, it stands at around 150bn USD. The frenetic evolution of the ecosystem has created challenges in understanding the basic principles of these systems and their security risks. In this Systematization of Knowledge (SoK) we delineate the DeFi ecosystem along the following axes: its primitives, its operational protocol types and its security. We provide a distinction between technical security, which has a healthy literature, and economic security, which is largely unexplored, connecting the latter with new models and thereby synthesizing insights from computer science, economics and finance. Finally, we outline the open research challenges in the ecosystem across these security types.
ISSN:2331-8422
DOI:10.48550/arxiv.2101.08778