COMMERCE 4FY3- Decentralized Finance 1

how fintech creates value

1)friction (what is slow, costly, or excluded)

2_technology(what tech)

3)business model

4)value capture

what is Decentralized Finance (DeFi

Financial services that operate without a traditional bank or central authority.

-direct interaction with smart contracts

-fewer layers

LECTRUE:financial system built on public blockchains (like Ethereum) where financial services are executed by code, not companies

Smart contract

: A program on a blockchain that automatically completes an agreement when conditions are met.

traditional finance

-multiple interactions

-frees at each layer

-cut-off times

-lots of people have no account

decetnralized finance

-open all tim 24/7/365

-all users to access finance infrascture regardles of backgrounf uses code not identity

-trasnparency:on-chain records

are all electrnic coins money

no some are real0world assets

what is ethereum (ETH)

second largetst cryptocurrency by market cap

Ethereum “conditional” contracts:

they use smart contracts

Proof of Stake (PoS):

Validators stake crypto as collateral and are randomly chosen to validate transactions, with more stake giving a higher chance.

what is staking

Locking up your cryptocurrency to help secure the blockchain.

how PoS works

1)staking

2validator selection: one validtor is chosen to propse blocks

3)block validation

4)slashing: if validor cheats then system automactacy destors their stake

proof of work KEY POINTS

• Uses real-world resources like electricity to secure the blockchain

• Uses a lot of energy

• Anyone can participate by mining

Proof of Stake (PoS) KEY POINTS

• Crypto at risk: You can lose your staked crypto if you cheat.

• Uses less energy: No mining needed.

• Rich can get richer: More crypto → more chances to earn rewards.