Decentralized Finance (DeFi) has become a transformative force in the financial sector, using blockchain technology to create open, permissionless financial services. Its total value locked (TVL) grew from 675 million in 2020 to 180 billion in 2021, before stabilizing at 40-50 billion in 2023. This research examines DeFi infrastructure, applications, and governance mechanisms; analyzes challenges limiting adoption; and identifies trends shaping its evolution. Through analysis of literature, reports, and market data, this study examines DeFi’s technical foundations, application scenarios, governance structures, and development challenges. Results indicate DeFi has established robust foundations supporting diverse ecosystems but faces barriers in technical (scalability, security), regulatory (compliance, legal uncertainty), and market dimensions. Future evolution may be characterized by four trends: integration with traditional finance, cross-chain interoperability, balancing privacy with regulatory compliance, and institutionalization with maturing financial engineering. These findings contribute to literature on blockchain-based financial systems and provide guidance for practitioners, regulators, and researchers.
Jianrui Wang (Thu,) studied this question.
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