From stablecoins to tokenized Bitcoin, from money lending to borrowing platforms, decentralized finance has grown exponentially.
The aggregated market capitalization of Decentralized Finance has crossed USD $87B of total value locked as of May 9, 2021. Decentralized Finance has gained increased awareness in late 2020, led by platforms such as Uniswap, Maker DAO, Aave, and Curve. and open-source ecosystem where the transactions can be carried out, eliminating intermediaries. The motive behind such a decentralized mechanism is that it creates a trust-free, transparent. Decentralized finance can potentially replace traditional elements of a centralized financial system with smart contracts, a set of self-executing code, enabled through a blockchain. Thus we conclude that the financialization (the process by which financial markets become increasingly important in the economy and society) is a technology enabled phenomenon – something hitherto largely overlooked by the financialization literature.ĭecentralized Finance is an alternative form of finance that has no central authority to control or monitor transactions. Moreover, technology is not only changing existing markets, it is expanding the scope of markets. However, technology cannot be seen in isolation from other forces, most notably regulation, organisational innovation and new entrants. The contributions highlight the technologies and related innovations that are changing the nature of capital markets. In this note, we introduce the themes and issues highlighted by the papers in this Special Issue that addresses this gap in the literature. Capital markets are clearly complex adaptive techno-social systems that are undergoing dramatic changes yet they are rarely researched from an innovation research or technological change perspective. Further, there are concerns that this new paradigm leads to greater volatility and myopia in the core function of finance (raising capital for entrepreneurial activity). Technologically induced innovations such as electronic exchanges, high frequency trading (HFT) and exchange traded funds (ETFs) have made trading in capital markets faster, cheaper and more integrated, yet at the same time market liquidity has become more fragmented and opaque.
Technology has dramatically altered capital markets over the past few decades. This research is based on a review of recent publicly available information, along with, academic and industry literature. This research aims at illuminating the invisible side of Blockchain-enabled entrepreneurial finance by providing an informative and comprehensive mapping of the ICOs landscape in terms of understanding the trends, the process, the environment and the applicability and the challenges of this new capital-raising mechanism, while at the same time providing recommendations for future academic research, industry, policy-making and regulation. Distributed ledger technology and more specifically Blockchain and Ethereum are changing the way stakeholders invest, mainly through new mechanisms, one of which is the Initial Coin Offering, a way of financing a cryptocurrency startup or a startup company by means of crypto-coins, giving resources to projects that otherwise might not go forward. Currently, the entrepreneurial financial funding and investments landscape is changing due to the emergence of breakthrough technologies, aiming at fostering disruptive innovation, decentralization and democratization of fundraising. Within the spectrum of research on fundraising mechanisms and activities for projects or new ventures, the term entrepreneurial finance has emerged, looking into traditional and non-traditional ways for raising funds that are necessary for development, growth and scale.
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