Status: Draft -- Not PublishedWill be live at 11/15/2022 10:00
Decentralized Finance: Use cases, challenges and opportunities
Financial service firms and regulators are increasing their focus on the role of DeFi and Web 3.0 in finance. This IIF staff paper addresses current trends, emerging use cases, and business model considerations as we begin to consider some of the regulatory implications. As these technologies, protocols, and regulatory issues gain greater prominence, the paper provides a primer on the essentials about DeFi. It then moves on to explore opportunities for these technology solutions, challenges including user experience, digital identity and tokenization, and regulatory considerations and activity. These considerations will influence the likely future relationship between decentralized and centralized financial services and the IIF offers a view on potential pathways. The paper also offers a deep-dive on DeFi design, tokenization, and smart contracts exploring the tensions and tradeoffs between decentralization, security and scalability. The paper also addresses infrastructure questions within DeFi, such as the role of public cloud and digital identity.