SoK-Decentralized Finance (DeFi)

Overview: Decentralized Finance (DeFi), a blockchain powered peer-to-peer financial system, is mushrooming. One year ago the total value locked in DeFi systems was approximately 600m USD, now, as of January 2021, it stands at around 25bn USD. The frenetic evolution of the ecosystem makes it challenging for newcomers to gain an understanding of its basic features. In this Systematization of Knowledge (SoK), we delineate the DeFi ecosystem along its principal axes. First, we provide an overview of the DeFi primitives. Second, we classify DeFi protocols according to the type of operation they provide. We then go on to consider in detail the technical and economic security of DeFi protocols, drawing particular attention to the issues that emerge specifically in the DeFi setting. Finally, we outline the open research challenges in the ecosystem.