Introduction to Decentralized Finance provides an introductory, yet thorough, coverage of the field of decentralized finance (DeFi) and its main components, including decentralized exchanges (DEXs), automated market making (AMM), liquidity mining, yield farming, stablecoins, blockchain derivatives, DeFi protocol governance and others. The course will:
- Delineate the principles by which decentralised finance operates.
- Conceptualise the innovation/novelty and risks of DeFi by drawing parallels to its traditional financial (TradFi) applications.
- Survey the full range of existing DeFi applications and protocols.
- Explain how DeFi may disrupt existing financial system architectures.
- Discuss related emerging developments related to DeFi, such as Non-Fungible Tokens (NFTs) and Central Bank Digital Currencies (CBDCs).
The course runs over twelve Sessions, covering four themes:
- DeFi fundamentals (Sessions 1-4): An overview of what DeFi is and how it maps against traditional finance. In the first part of the course we also cover background material necessary to understand DeFi in depth, including an introduction to Ethereum (and other Layer 1 blockchains on which DeFi applications run), smart contracts, fungible and non-fungible tokens, and so on.
- The DeFi application stack (Sessions 5-8): A deep-dive on the components of the DeFi application stack, including decentralized exchanges, automated market making, lending and borrowing, liquidity mining, yield farming, decentralised insurance, synthetic assets, oracles, stablecoins, etc.
- DeFi governance (Sessions 9-10): A discussion on algorithmic governance, its applications to DeFi and the future of decentralized autonomous organizations (DAOs).
- Beyond DeFi (Sessions 11-12): An exploration of the space of blockchain-based applications extending the reach of DeFi, such as non-fungible tokens, asset tokenization and prediction markets.
After completion of the course, students are expected to be able to:
- Define DeFi and explain how it will compete with, complement or disrupt traditional finance.
- Summarize the basic application stack of DeFi and give examples of how decentralized exchanges, automated market making, lending/borrowing, synthetic assets and derivatives on DeFi, and other components of the DeFi application stack work.
- Explain the main risks associated with DeFi, including smart contract risks, impermanent losses, regulatory implications and others and propose actions to mitigate them.
- Transact with main types of DeFi protocols and applications in Ethereum, Binance Smart Chain and other blockchains.
- Assess and explain advanced or complementary applications of DeFi, such as NFTs and CBDCs.