Web3 and Decentralized Finance: Reshaping Global Finance

Abstract

The advent of Web3 technology and the rise of decentralized finance (DeFi) have sparked a paradigm shift in the financial ecosystem. This paper delves into the transformative potential of DeFi protocols, exploring their structure, functionality, and impact on traditional financial systems. Through a comprehensive review of existing literature and empirical studies, we uncover the advantages and challenges associated with the adoption of DeFi. Our analysis highlights how DeFi platforms, including lending protocols, decentralized exchanges, stablecoins, and yield farming mechanisms, offer enhanced efficiency, reduced costs, and greater accessibility. However, we also underscore the critical issues surrounding security vulnerabilities, regulatory compliance, and market stability that must be addressed to ensure sustainable growth.

By proposing critical research questions and suggesting future research directions, this paper contributes to the ongoing discourse on the role of DeFi in reshaping global finance and its potential to create a more inclusive, efficient, and transparent financial ecosystem.