# A Review on Decentralized Finance Ecosystems
## 1 Introduction  
The development of the internet has led to the emergence of blockchain technology, which has the potential to improve various aspects of human life significantly. Blockchain technology has emerged as a transformative force with promising implications in the digital realm [1]. Blockchain technology offers a plethora of advantages, including enhanced credibility, transparency, accessibility, and cost-effectiveness, thereby positioning it as a viable solution to tackle the persistent issue of financial inclusion faced by the unbanked population [2]. Blockchain technology finds widespread adoption across diverse sectors such as education, healthcare, and finance, showcasing its versatility and relevance [3]. Furthermore, blockchain technology's presence as a potent enabler fosters anticorruption efforts, adding another layer of societal significance [4]. In the financial sector, the rise of DeFi has proven instrumental, particularly within the crypto economic phenomena. Prominent DeFi platforms, including Ethereum, Binance Smart Chain, and Tron, play pivotal roles in this landscape. It is worth noting that DeFi implementations can be conducted on authorized distributed ledger technology (DLT) platforms or alternative technologies that offer akin functionality [5]. DeFi encompasses a collection of digital financial applications that operate on decentralized blockchain networks, benefiting from the security and reliability provided by DLT [6]. DeFi applications offer a diverse array of financial services, including lending, derivatives, decentralized exchanges, asset management, security, stablecoin, insurance, borrowing, staking, yield farming, and payments [7]. In its early stages, DeFi applications were primarily developed on permissionless blockchains, facilitating direct user transactions without the need for central governance. Users also participated as validators, ensuring a decentralized nature [8]. One of DeFi's distinctive features is the ability to utilize real-world assets (RWAs), which involves integrating tokenized off-chain assets into the blockchain ecosystem for efficient transactions. Integrating real-world assets into blockchain can unlock unique opportunities and enhance market efficiency for asset holders, setting it apart from TradFi systems [9]. By facilitating asset tokenization and the development of decentralized applications (DApps), DeFi plays a significant role in enhancing market efficiency within financial activities [5]. Tokenization represents a convergence of digitization, securitization, and blockchain technology, facilitating the transformation of conventional assets into digital native assets. Market participants gain direct custody and settlement capabilities by adopting tokenization, thereby enhancing portfolio management flexibility. Moreover, this process bestows traditional assets with augmented transparency, security, speed, traceability, and cost-effectiveness. Additionally, tokenization makes establishing a robust and scalable infrastructure for a well-organized digital asset ecosystem possible. Consequently, the capital market is democratized, inviting participants of all sizes to engage actively, and promoting inclusivity in financial systems [9]. DeFi has garnered attention for its potential to disrupt and transform TradFi, bridging cryptocurrency assets and traditional markets [10]. The advantages offered by DeFi, which are absent in TradFi systems, encompass transparency, disintermediation, accessibility, low fees, custom rates, and programmability [11]. A key strength of DeFi lies in its facilitation of global lending and borrowing with reduced costs compared to TradFi mechanisms [12]. It is crucial to distinguish DeFi protocols as alternatives to banking and investment services rather than being positioned as payment solutions or currencies akin to Bitcoin or Ethereum [13]. Notably, DeFi addresses potential issues, such as asset loss, through the provision of insurance covering various DeFi products and services.