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Duke University

Decentralized Finance (DeFi) Opportunities and Risks

Duke University via Coursera

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Overview

Class Central Tips
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.

Syllabus

  • Smart Contract 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.
  • Governance, DNS, Oracle, DEX and Custodial Risk
    • 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.
  • Scaling Risk
    • 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.
  • Regulatory and Environmental Risk
    • 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.
  • Winners and Losers

Taught by

Cam Harvey

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Reviews

5.0 rating, based on 3 Class Central reviews

4.9 rating at Coursera based on 283 ratings

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  • Anonymous
    Professor Harvey makes the complicated understandable. I highly recommend taking his decentralized finance courses at duke and reading his writings to do a deep dive into all things decentralized finance.
  • Anonymous
    Professor Harvey makes the complicated understandable. I highly recommend taking his decentralized finance courses at duke and reading his writings to do a deep dive into all things decentralized finance.
  • Anonymous
    The final course in Prof Harvey’s 4-course series on DeFi is a frank and open discussion of both the transformational potential of DeFi and the risks and hurdles involved in achieving that potential. He does not shy away from acknowledging that we are in the early stages of DeFi’s evolution, and that consequently there are weaknesses in the concept that need to be overcome. At the same time he presents a vision of DeFi (and indeed tokenization in general) that presages a disruptive transformation of how we keep track of what we do.
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