A closer look into decentralized finance

Decentralized finance is a technological infrastructure built on a block-chain networking environment that supplies transparent, uncensorable, and decentralized financial services and products. This infrastructure offers the opportunity to replicate traditional financial instruments on a decentralized platform and incorporate added features provided by block-chain technology. It also allows the creation of new instruments native to blockchain technology unavailable through traditional financial institutions. This chapter presents an in-depth analysis of the inner workings of stablecoins, decentralized exchanges, automated market makers, liquidity pools, decentralized lending, synthetic instruments, and asset management. It also provides specific examples for each application and presents some current challenges the sector faces.