Exploring the Evolution from Traditional Finance to Decentralized Finance (DeFi): Understanding Digital Assets, Blockchain, and Financial Transformation

Abstract

The digital revolution has redefined how people perceive, store, and transfer value. Digital assets-powered by blockchain technology-are reshaping the foundations of the financial world. This article explores the evolution from traditional finance (TradFi) to decentralized finance (DeFi), highlighting the technological and economic shifts that enable this transformation. The paper explains the structure and function of blockchain, Bitcoin, Ethereum, and smart contracts, as well as their application in DeFi ecosystems. Furthermore, it categorizes and analyzes the major sectors of DeFi, including decentralized exchanges, lending platforms, stablecoins, and asset management. The discussion concludes by reflecting on opportunities and risks in this emerging decentralized economy.