Decentralized Finance and Distributed Autonomous Organizations: on the Rise

Abstract

The traditional finance market is centralized. Central authorities issue the currency that powers our economy. Centralized financial organizations, e.g., banks, control our assets. Hence, the ability to regulate the flow and supply of such currencies in the market resides with a central authority. Risk is also at the center. The centralization of authority and practice across the financial system has led to a potentially unmanageable level of complexity. Complexity at this magnitude creates risk. Unchecked risk will increase creating new vulnerabilities. This coupled with a lack of transparency compounds the problem. For example, if central banks print more currency to handle a financial crisis and it does not resolve the crisis, it may result in extreme inflation disrupting an entire economy. A potential solution is to decentralize. Cryptocurrencies like Bitcoin, Ether and hundreds of others offer secure decentralized peer-to- peer trading without intermediaries. Here users have control over their crypto assets.