/ DeFi, Publication
DeFi's Promise and Pitfalls
Publication by Fabian Schär in Finance and Development, a quarterly publication of the International Monetary Fund
Decentralized finance could support a new financial infrastructure if challenges are overcome.
Digital innovation has brought major improvements to the financial system. But the system’s architecture remains essentially the same. It’s still centralized.
Decentralized finance (DeFi) offers an alternative. It uses public blockchain networks to conduct transactions without having to rely on centralized service providers such as custodians, central clearinghouses, or escrow agents. Instead, these roles are assumed by so-called smart contracts.