The Bank of Canada published a staff note on decentralized finance (DeFi) on Oct. 17, assessing the innovations that made it popular and the challenges and risks associated with its use.
The staff note described DeFi as a multi-layered structure, with the Ethereum blockchain serving as the bottom layer (or settlement layer). Developers construct a variety of tools and services on top of the main blockchain, including tokenization, lending and borrowing services, and much more.