DeFi Cybersecurity Technical and Nontechnical Risks

Decentralized finance (DeFi) is a financial application built on the public ledger of blockchain technology. This technology allows users to access permissionless financial services without relying on a third party. DeFi represents an open financial system based on blockchain smart contracts. However, the DeFi platform centralizes users’ account information, payment credentials, and other sensitive data such as passwords, making it susceptible to cyber threats. Security issues, such as fraud prevention and data privacy, are on the rise, leading organizations to employ encryption to safeguard DeFi data. Despite its benefits, DeFi faces similar risks and challenges as other financial products and services, including liquidity risks, volatility risks, and market hazards. In this book chapter, the authors aim to explore DeFi issues, focusing on cybersecurity risks and problems. The discussion will cover DeFi adoption concerns and risk management plans. Both technical and nontechnical risks will be discussed, linking these risks to their potential impact on entrepreneurship.