Decentralized Finance (DeFi), Strengths Become Weaknesses: a Literature Survey
Abstract
The use of blockchain technology in Decentralized Finance (DeFi) has gained popularity, with 23 public companies and one country holding bitcoin. DeFi aims to create an open and decentralized financial ecosystem that is accessible to everyone, eliminates intermediaries like financial institutions, and is verifiable, immutable, globally accepted, fast, low-cost, anonymous, and non-custodial. Despite its benefits, the rapid growth of DeFi has led to increased security risks. This study assesses the validity of DeFi's superiority claims in light of security incidents and events in 2022 and Twitter trends. This study used a Systematic Literature Review from various research articles and news from 2022. This research found that DeFi's superiority claims seem to be inconsistent with what is being advertised. It also found that if DeFi is not properly prepared and audited, its strength (Anonymous, open-source, decentralized, non-custodial, eliminates third parties and regulation) may become its weakness. Despite this, users still exhibit high levels of trust and optimism, as seen in the most popular terms shared by user tweets during significant losses, with 301,654 unique tweets between April 30 and May 31, 2022 and 344,519 unique tweets between October 3 and December 3, 2022, that are crypto, nft, and blockchain.
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