Key Concepts of Decentralised Finance (DeFi)

GDS Modellica
With the aim of “closing the gap” between fintech and blockchain applications, three researchers at the Bank of Canada produced a large study, recently published by the Multidisciplinary Digital Publishing Institute (MDPI), a platform providing open access to peer-reviewed scientific papers.

In the abstract of the paper, titled A review of Blockchain in Fintech: Taxonomy, Challenges and Future Directions, the authors consider that “because it is still believed to be in its infancy, especially when it comes to financial use cases, blockchain has both positive and negative aspects. As a result, it is critical to be aware of all of the open research issues in this field”. The study’s objective is to “compile a list of open research challenges related to various aspects of the blockchain’s protocol and application layers” and, furthermore, provide a “clear” understanding of the applications for which blockchain could be valuable, as well as the risks associated with its use in parallel.

Over the course of 52 pages overflowing with information (more than 25,000 words), the authors address the fintech ecosystem and blockchain technology, review existing blockchain platforms, develop a taxonomy of use cases and identify the research challenges that the combination of both technologies create, which together make up a scenario that is increasingly referred to as Decentralised Finance (DeFi).

Here at GDS Modellica, we have taken the liberty of compiling some of the key concepts of DeFi into an infographic. This way, our readers can get a general idea of what it is all about before deciding whether or not to delve into the full paper.
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