Project 3: Research Proposal

This assignment required writing a formal research proposal based on UCF's Student Research Grant application. We had to select and research a topic related to our major, compile a list of sources, and determine the actions and budget needed to complete the research. This project helped us gain experience with writing formal external proposals within a real-world setting.

Project Title

Decentralized Finance and the Evolution of Banking: A Blockchain-Based Analysis of Accessibility, Scalability, and Impact

Project Objective

This project aims to investigate how decentralized finance (DeFi) platforms are transforming traditional banking systems by offering new, alternative methods of borrowing, lending, and managing digital assets.

The project’s research questions are “How are DeFi platforms impacting traditional finance institutions, consumers, and the economy?” and “How can governmental regulatory bodies ensure the long-term safety and stability of DeFi platforms?”

The research conducted in this project will analyze core technological components behind DeFi protocols, including smart contracts and consensus mechanisms. Assessments on the scalability, reliability, and potential risks of DeFi and blockchain-based platforms will also be included. This project will also explore recommendations on policy for DeFi so regulatory agencies can make well-informed policy decisions.

Project Background and Significance

The rapid development and growth of DeFi highlights a fundamental shift in the financial services industry. The advent of digital banking has greatly increased the convenience of sending and receiving money. However, digital banking platforms still rely on the same centralized banks that have been around for over one hundred years. DeFi platforms allow users to have direct access to financial tools like lending, borrowing, and asset trading and management, all without the need to rely on intermediaries such as banks or other financial institutions (Xu and Vadgama 6). There are several potential benefits to the widescale implementation and adoption of decentralized finance platforms, including reduced cost to consumers due to the lack of fees imposed by intermediaries, reduced transaction settlement time, and access to essential financial tooling for individuals who have been excluded from or are unable to use centralized finance systems (Mirdala 521). As of the time of writing, over $97 billion of assets have been locked into DeFi platforms—an increase from $351 million in 2020 (Castro-Iragorri et al. 2).

This research is significant because it covers a topic at the forefront of innovation in finance and computer science and may substantially impact our financial institutions, business practices, and consumer safety (Hadi et al. 296-297). As DeFi continues to grow, it becomes even more imperative to understand the risks behind the platforms, and how consumers, businesses, and regulatory agencies may adapt to mitigate these risks as much as possible. Unlike traditional banking systems, DeFi operates transparently through open-source code, a public global transaction register, and community-led governance (Bakare et al. 3080-3081). These aspects of DeFi pose new benefits and challenges to the long-term safety and stability of our economy.

The theoretical framework used for this research derives from the Socio-Technical Systems Theory (STST) and the Actor-Network Theory (ANT). The STST states that organizations are interconnected between social and technical systems, and that the capabilities and constraints of both people and technology must be considered for success. The ANT states that humans and objects in our world are all part of ever-changing networks that produce social, economic, and technological results. Both theories describe the relationships between humans and technology, and how they play an integral role in shaping functional and trustworthy systems, such as financial transaction platforms.

Research Methods

This project will use a combination of both quantitative and qualitative methods to draw meaningful conclusions about the role, implications, and future potential of DeFi platforms. The research will occur during the UCF Summer C semester (May 12, 2025, to August 1, 2025) over a span of twelve weeks. During this process, three DeFi platforms will be selected for comparative case studies that outline their technologies, governance, risk, and stability. Regulatory policy recommendations will also be made, given the findings of the case studies.

Weeks 1-2: Background Research

The project will begin with an extensive review of existing literature and case studies about DeFi platforms and protocols to establish a firm background. Types of literature reviewed will include whitepapers, peer-reviewed articles, and documentation from DeFi platforms. This step is necessary to understand the current state of development of DeFi.

Weeks 3-4: Case Studies Selection

Three DeFi platforms will be chosen for an in-depth case study. Platforms will be chosen based on their technical aspects (such as use of smart contracts, consensus mechanisms, etc.), number of active users, and total value locked. Blockchain activity using publicly available data from sources such as Dune will be included in the analysis. This step is necessary to identify common strengths and weaknesses in the DeFi landscape, including potential risks or areas for improvement.

Weeks 5-7: In-Depth Case Study Analysis

The three platforms chosen for case studies will be further researched. Topics explored will include accessibility, scalability, governance, and technology. A risk assessment will also be included to determine potential for security breaches, market manipulation, and liquidity issues, as recommended by Ali (23-25). This step is necessary to provide relevant data about industry leaders that produce actionable results.

Weeks 8-9: Impact Assessment

Next, the data and conclusions from the three case studies will be compiled into a collective impact assessment. This assessment will determine the present impact that DeFi has on the current centralized banking system by analyzing changes in market share, customer growth rates, and transaction volumes among the leading DeFi platforms. Future impacts will be assessed using statistical forecasts to determine potential changes in trends. These trends will also be analyzed to give recommendations to stakeholders in industries that will be impacted by DeFi.

Weeks 10-11: Regulation Policy Recommendations

There is no international consensus on how cryptocurrency, and by extension DeFi, should be regulated (Bakare et al. 3086). Information from the case studies, impact assessment, and external sources will be used to create regulatory policy recommendations that align with the United States Government’s current goals. The goal of this step is to evaluate the US Government’s current position on cryptocurrency regulation and provide a set of potential actionable steps that lawmakers can implement.

Week 12: Revise

The report’s findings will be compiled, and deliverables will be published as outlined below.

Expected Outcome

For this project, three deliverables will be created.

First, an academic research paper will be written, compiling findings from the three case studies, impact assessment, and policy recommendations. Graphs illustrating quantitative data, including the historical growth of DeFi adoption, as well as visual explanations of DeFi platform functionalities, will be included. Due to the pausing of submissions to the Pegasus Review: UCF Undergraduate Research Journal, the author will seek alternative undergraduate journals, such as the Florida Undergraduate Research Journal or UCF’s Honors Undergraduate Thesis program, to publish the article in.

Second, a poster and speech cards will be created for presentation at UCF’s Student Scholar Symposium during Research Week 2026. Key metrics and insights about DeFi platforms and their impact on traditional finance systems will be included on the poster, and key takeaways from the research will be discussed. Policy recommendations for regulation of DeFi will also be discussed.

The Student Scholar Symposium will serve as an opportunity for the UCF community to learn more about decentralized finance platforms, how they compare to traditional banks, and potential risks and benefits to be aware of, especially as the technology continues to grow in the future. The paper will also serve as a model for further interdisciplinary undergraduate research, allowing future students of finance and computer science to work together to further research DeFi or create their own implementation.

Third, a white paper will be created to explain important information about DeFi to a wider audience. This white paper will provide clear, easily understandable explanations intended for lawmakers, finance professionals and those interested in DeFi and emerging technologies. By explaining how DeFi and blockchain work, showcasing its function, impact, and potential risks, the paper will educate readers and encourage further discussion. The paper will be distributed through online finance- and technology-related communities, where it will be accessible to its target audience. This will allow the FinTech community to benefit from greater public understanding of DeFi technology, potentially leading to increased worldwide adoption.

Ultimately, this project aims to increase public awareness of DeFi and inform consumers of the latest developments in decentralized financial technology.

Preliminary Work and Experience

Preliminary research has already been conducted to gain insight into the current state of DeFi platforms and the cryptocurrency ecosystem. The project author is currently pursuing a bachelor’s degree in computer science with a minor in FinTech. Through his academic background, he has gained foundational knowledge in both the technical and economic aspects of the technology used to make blockchain and DeFi possible. Relevant Coursework includes Computer Science I, Computer Science II, Systems Software, Security in Computing, Data Science Programming, and Business Finance. The author has previously completed research projects for other courses, including data science projects involving analysis of large datasets using Python. The author has also consulted with Dr. Ajai Singh (Chair of the Department of Finance), Dr. Cuneyt Akcora (Associate Professor of Finance), and Dr. Pradipkumar Ramanlal (Associate Professor of Finance) regarding relevant coursework. Together, these competencies and experiences demonstrate the author’s ability to conduct an unbiased, comprehensive study of DeFi and its impact on traditional banks.

IRB/IACUC Statement

This project does not require IRB or IACUC approval.

Budget

• $399: 1-month subscription to Dune Analytics Plus to analyze premium data sets related to cryptocurrency and DeFi platforms.
• $100: AWS EC2 compute credits to run data science and analysis workloads (such as statistical analysis, predictive modeling, and simulations), which require increased computing power.
• $100: Poster materials & printing for the UCF Student Scholar Symposium.

Total expenses: $599