Identifying Key Non-Financial Risks in Decentralised Finance on Ethereum Blockchain

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This article identifies twelve defined non-financial risks for Decentralised Finance (DeFi) on Ethereum blockchain.

What is DeFi?

Decentralised Finance Applications (herein called “DeFi”) has taken the world by storm since its inception in 2017.

DeFi is the transformation of traditional financial products into products that operate without an intermediary via smart contracts on a blockchain.

The value of DeFi specific to the Ethereum blockchain, has grown from $4 on August 2017, to $7,820,000,000 as of time of writing September 7, 2020. Types of DeFi applications are wide-ranging. Some popular DeFi applications include lending, stablecoins, decentralised exchanges (DEXs), derivatives, synthetic assets, insurance and asset management.

Value has grown from $4 on August 2017, to $10,730,000,000 as of September 26 2020… Source: defipulse.com

DeFi is lucrative compared to its counterpart of traditional finance as it offers yields (returns) unobtainable in traditional finance. In the past year especially, DeFi has enjoyed a meteoric rise…