Title page

Contents

1. Overview 3

2. Blockchain Basics 4

2.1. Network of Computers 5

2.2. Smart Contracts 6

3. DeFi Products and Services 6

3.1. Lending 9

3.2. Decentralized Exchanges 11

3.3. Derivatives 12

3.4. Payments 12

3.5. Asset Management 14

4. Risk Implications of DeFi 14

4.1. Blockchain and DeFi Risk Mitigation 15

4.2. Operational Risk in a Trustless Environment 17

4.3. Operations Risk in an Environment with a Trusted Third Party 21

4.4. The Interface of Traditional and Crypto Finance 25

5. Conclusion 26

6. References 27

Table 1. Traditional Finance vs. DeFi 31

Table 2. Top 50 DeFi Applications by Total Value Locked 32

Figure 1. Total Value Locked by Blockchain 33

Figure 2. Total Value Locked by Category 33

Figure 3. Number of Decentralized Applicatioins 33

Figure 4. Total Market Cap by Cryptocurrency 33