Decentralized Finance (DeFi) Opportunities and Risks

Decentralized Finance (DeFi) Opportunities and Risks

This course is part of Decentralized Finance (DeFi): The Future of Finance Specialization

Instructor: Campbell R. Harvey

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5 modules

Gain insight into a topic and learn the fundamentals.

352 reviews

Intermediate level

Recommended experience

6 hours to complete

Flexible schedule

Learn at your own pace

5 modules

Gain insight into a topic and learn the fundamentals.

352 reviews

Intermediate level

Recommended experience

6 hours to complete

Flexible schedule

Learn at your own pace

What you'll learn

A framework to evaluate DeFi risk; Environmental implications of cryptocurrency; and winners and losers in the future of finance.

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Assessments

4 assignments

Taught in English

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This course is part of the Decentralized Finance (DeFi): The Future of Finance Specialization

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There are 5 modules in this course

DeFi and the Future of Finance is a set of four courses that focus on decentralized finance. The final course is called DeFi Opportunities and Risks. It is essential that you complete the first three courses: I. DeFi Infrastructure; II. DeFi Primitives; and III. DeFi Deep Dive before beginning the fourth course. The course starts with the premise that an analysis of any new technology must clearly gauge the risks and challenges. Given that DeFi is only a few years old there are plenty of risks. The course begins with the most obvious risk: smart contract risk. Smart contracts are foundational for DeFi. The code of these contracts is public - opening a clear attack vector for hackers. That is, in traditional finance, hackers need to break into a system to get access to the code and data. In DeFi, everything is open source.There are many other risks studied including: Governance risk; Oracle risk; Scaling risk; Decentralized Exchange or DEX risk; Custodial risk; Environmental risk; and Regulatory risk.

The first model explores both logic errors and economic exploits that characterize smart contract risk. We then focus on some specific exploits including the Yearn.finance exploit that utilized a massive flash loan.

What's included

4 videos2 readings1 assignment

The second model explores additional risks including governance attacks, DNS attacks, oracle vulnerabilities, and DEX risk. The module ends with an exploration of the different types of custodial arrangements and the risks that each approach creates.

What's included

5 videos1 assignment

Scaling risk is one of the biggest risks facing DeFi. Current capacity of the Ethereum blockchain is only about 15 transactions per second whereas the Visa network is 65,000. This module explores potential solutions to the scaling problem.

What's included

4 videos1 assignment

The final module explores the regulatory risk that the DeFi space faces from KYC/AML to the potential declaration that some DeFi tokens are securities. Central bank digital currencies are also explored. We then explore the environmental impact of Proof of Work consensus and the migration to the environmentally friendly Proof of Stake.