Review

A Survey of Blockchain Applications in the FinTech Sector

Tara Renduchintala 1, Haneen Alfauri 2,*, Zebo Yang 2, Roberto Di Pietro 3 and Raj Jain 2

1 Electrical and Computer Engineering Department, University of Southern California,

Los Angeles, CA 90007, USA
2 Computer Science and Engineering Department, Washington University Saint Louis,

St. Louis, MO 63130, USA

3 Science and Engineering Department, Hamad Bin Khalifa University, Ar-Rayyan 5825, Qatar

* Correspondence: [email protected]

Abstract: FinTech has proven its true potential in traditional financial offerings by delivering digital
financial services to individuals worldwide. The pandemic has accelerated how people interact with
financial services and has resulted in long-term changes to societies and economies. FinTech has
expanded access to financial services and has made such changes possible. FinTech or Financial
Technology refers to using new technologies for financial services. Artificial Intelligence, Block-
chain, and cloud computing are a few technologies currently being applied to FinTech. In this paper,
we consider FinTech, which partly uses blockchain technology. Blockchain technology plays a vital
role in the financial sector as it ultimately lifts trust and the need for third-party verification by using
consensus-based verification. This survey provides a comprehensive summary of the most relevant
blockchain-based FinTech implementations and an overview of FinTech sectors and segments. For
each segment, we provide a critique and a discussion on how each blockchain implementation con-
tributes to solving the majority of problems faced by FinTech companies and researchers. This re-
search aims to direct the future of financial solutions by providing an outline of the applications of
blockchain technology and distributed ledger technology (DLT) for FinTech. We discuss various
implementations, limitations, and challenges of blockchain-based FinTech applications. We con-
clude this work by exploring possible strengths, weaknesses, opportunities, and threats (SWOT)
analysis and future research directions.
Citation: Renduchintala, T.; Alfauri, H.;
Yang, Z.; Di Pietro, R.; Jain, R. A
Survey of Blockchain Applications in
Keywords: blockchain; FinTech; payment services; deposits and lending; financial services; bitcoin;
the FinTech Sector. J. Open Innov. Ethereum; Hyperledger; smart contract; digital wallet
Technol. Mark. Complex. 2022, 8, 185.
https://doi.org/10.3390/joitmc8040185

Received: 18 August 2022

1. Introduction
Accepted: 25 September 2022
Published: 13 October 2022 The economic disruption due to the pandemic has led to tremendous growth in dig-
ital financial services and e-commerce as social distancing has taken hold worldwide. Ac-
Publisher’s Note: MDPI stays neutral
cording to the World Bank [1], there are 1.7 billion unbanked individuals worldwide; half
with regard to jurisdictional claims in
of these include women in rural areas or out of the workforce. The toll of the COVID-19
published maps and institutional affili-
ations.
pandemic highlighted the importance of the inclusion and serving of people currently
outside financial systems [2].
According to the 2020 Global COVID-19 FinTech market rapid assessment study [3],
a more significant push towards digitalization during the pandemic was seen in most
Copyright: © 2022 by the authors. Li- types of FinTech firms, who reported strong growth in transaction numbers and volumes
censee MDPI, Basel, Switzerland. This of 13% and 11%, respectively, for the first half of 2020 compared to the same period in
article is an open access article distrib- 2019, which was before the pandemic.
uted under the terms and conditions of FinTech improves activities in finance by using digital technologies. Applying digital
the Creative Commons Attribution (CC methods to traditional financial activities eases the online demands brought by the pan-
BY) license (https://creativecom- demic. Yet, it still raises concerns about centralization, such as dictatorship, data monop-
mons.org/licenses/by/4.0/). oly, data tampering, and user privacy issues. Blockchain technology, the most practical

J. Open Innov. Technol. Mark. Complex. 2022, 8, 185. https://doi.org/10.3390/joitmc8040185 www.mdpi.com/journal/joitmc

J. Open Innov. Technol. Mark. Complex. 2022, 8, 185 2 of 44

decentralized solution, has recently attracted much attention. It removes the need for
third-party verification for transactions (i.e., the need for centralized exchanges).
In 2019, Gartner estimated that blockchain remains in the “Peak of Inflated Expecta-
tion” region, gaining a high interest from investors and consumers with a forecast to reach
a plateau in “five to ten years”. The report predicted that blockchains will undergo more
mainstream adoption in 2023, thus leading to a generation of $3.1 trillion [4] in new busi-
ness value by 2030.
This growth is partly due to multinational corporations and technology industry gi-
ants using blockchain to capture larger market shares.
The adoption of blockchain technology by FinTech companies is inevitable [5]. In
2021, the Gartner report [6] categorized decentralized finance in the “innovation trigger”
region, meaning that the technology is subject to significant media and industry interest,
with a high potential for technology breakthrough. Blockchain-based FinTech solutions
can offer financial services at lower costs and a higher level of accessibility [7] when com-
pared with traditional solutions.
Blockchain technology can provide decentralized, secure, and traceable storage, at-
tracting massive industry investment. There are currently several blockchain applications
that span a vast range of industries, including healthcare [8], IoT [9], security [10,11], data
privacy [12], supply chain and goods tracing [13,14], the energy sector [15], product coun-
terfeiting [16], etc. Among the various sectors interested in the blockchain industry,
FinTech stands out and has become a prevalent topic with great promises.
Financial behaviors such as banking and trading have changed since the emergence
of blockchain. Traditional financial institutions are pouring money into FinTech compa-
nies and startups to leverage innovation and gain a competitive advantage over their
peers [17]. The FinTech industry incentivizes traditional banking institutions to develop
their blockchain infrastructure to seize the market share of FinTech services.
Although there are high-level reviews of blockchain technology [18–21], a systematic
comparison of blockchain platforms in the context of financial applications is still lacking.
There is a considerable gap in investigating how blockchains and distributed ledger tech-
nologies are implemented and used for financial services on a technical level for various
FinTech Segments. Other studies [22] have provided an overview of existing fintech plat-
forms from a theoretical lens by presenting a plan for adopting fintech platforms. Others
[23] have investigated digital finance from a business function perspective.
The authors in [24] investigated FinTech innovations (e.g., ML, blockchain, and alter-
native finance) and the related regulatory issues. Our paper is solely focused on laying
out blockchain-based applications for FinTech segments.
This survey focuses on using blockchains to enhance the way financial services are
offered to individuals and businesses by FinTech companies. We discuss how different
companies leverage blockchains to realize their goal.
The contributions of this paper can be summarized as follows:
(1) This survey provides a thorough and detailed systematization and summary of the
most relevant blockchain-based FinTech implementations.
(2) We provide an overview of various FinTech Sectors and segments. For each FinTech
segment, we map the current blockchain applications and discuss how these imple-
mentations contribute to solving the vast majority of problems faced by FinTech com-
panies and users.
(3) We also present detailed blockchain-based use-cases to illustrate how different block-
chain applications are implemented for various financial services.
(4) We provide an overview of some critical challenges in implementing blockchains for
FinTech and a summary of related research work.
(5) We provide a discussion and SWOT analysis to identify the strengths, weaknesses,
opportunities, and threats in this field.
J. Open Innov. Technol. Mark. Complex. 2022, 8, 185 3 of 44

The rest of the paper is organized as follows. Section 2 provides an overview of the
procedures and methodology that we followed in our research. Section 3 provides a brief
background on blockchain architecture, highlights the most popular blockchain imple-
mentations’ key characteristics, and introduces smart contracts that enable FinTech com-
panies to provide low-cost, secure, and decentralized applications. Section 4 introduces
the FinTech literature and discusses blockchains’ interaction with banking and their ap-
plications within the main three segments of FinTech (Payments, Deposits and Lending,
and Investment Management). Section 5 reviews the Payments segment. Section 6 reviews
the Deposits and Lending segment. Section 7 discusses the FinTech Investment Manage-
ment segment. Section 8 discusses key challenges facing blockchain implementations for
FinTech, examines blockchain-based Defi, and provides a SWOT analysis to identify the
field’s strengths, weaknesses, opportunities, and threats.
To the best of our knowledge, this is the first mapping study of blockchain applica-
tions in solving the issues faced by the Fintech segments from a technical point of view.

2. Methodology
For a comprehensive review and analysis of blockchain applications in the FinTech
sector, multiple survey processes and techniques were used to gather and examine infor-
mation in academic and industry settings. In this section, we summarize the procedure
that we followed in this survey.
The first step was choosing the databases (i.e., data sources) that will be used to ex-
tract academic articles and research papers. We compared the top three databases (Sco-
pus, Google scholar, and Web of Science) used in this field. It was found that Google
Scholar was able to find most of the citations in Social Sciences articles (94%), while Web
of Science and Scopus found 35% and 43%, respectively [25]. Therefore, Google scholar
was chosen as our search database. This is shown in step 1 of Figure 1. We conducted a
literature review that included all available academic publications and practitioner-ori-
ented papers on the topic of FinTech for the last seven years (2016–2022).
Our search terms for FinTech literature were (“FinTech” OR “Financial services” OR
”Finance”), and our search terms for blockchain literature were (“Blockchains” OR ”Dis-
tributed Ledger”) and (“Application” OR ”Service” OR ”DApp” OR ”Implementations”).
This is shown in step 2 of Figure 1.
We conducted a systematic literature search on blockchain-based applications for
FinTech. We identified potential papers and conducted a quality assessment and filtering
to avoid sampling any poorly conducted studies whose biases may skew. The papers were
selected based on three factors: the journal ranking, the number of citations since it is a
good indication of the papers’ popularity, and a manual assessment of their potential to
solve the current issues faced by each segment. This is shown in step 3 of Figure 1.
Then, we conducted a systematic literature search on FinTech to gain a deeper un-
derstanding of the academic publications. During our literature search, we identified a
possible research question. We found a considerable gap in investigating how blockchains
and distributed ledger technologies are implemented and used for financial services on a
technical level. This is shown in step 4 of Figure 1.
We then investigated the evolution of financial services and FinTech. Our study
builds on prior work by Deloitte [26], where they categorized financial services segments
and provided an overview of the characteristics of each of the segments. After defining
the main three segments of financial services, we delve into a deeper search to find poten-
tial issues for each segment of the financial sector. This is shown in step 4 of Figure 1.
After identifying and filtering the most popular blockchain solutions, we spent an
extensive amount of time working on mapping each blockchain technology within each
segment, where we highlighted how each application solves an issue within the allocated
segment. This is shown in step 5 of Figure 1.
J. Open Innov. Technol. Mark. Complex. 2022, 8, 185 4 of 44

Finally, based on the review and investigation in the Fintech literature, we examined
blockchain-based Defi by establishing a SWOT analysis to identify the strengths, weak-
nesses, opportunities, and threats in this field. This is shown in step 6 of Figure 1.
Figure 1 summarizes the procedure that we followed in our survey.

Figure 1. Procedures and methodology.

3. Blockchain Background
This section starts with an overview of blockchain architecture and smart contracts.
A comparison of different open-source blockchain implementations for FinTech is pro-
vided. We aim to ensure the readers’ familiarity with blockchain technology and its key
characteristics crucial to FinTech.

3.1. Blockchain Architecture

A blockchain can be regarded as an append-only, shared, fault-tolerant, distributed
database. A blockchain is immutable because all blocks are connected via hash functions.
Any tamper of a block invalidates all the following blocks.
A chain is formed by connecting the blocks. Each block contains the hash value of the
block before it (i.e., each block points to its previous block). The blocks consist of several
time-stamped transactions collected from users’ broadcasts. Each block also stores the
time of creation. Each transaction is verified before its inclusion in a block.
J. Open Innov. Technol. Mark. Complex. 2022, 8, 185 5 of 44

By having the blocks linked to each other, an immutable data chain is prepared,
whose copies can be safely kept on distributed network nodes. With a consensus protocol,
a decentralized system can be achieved without a centralized authority controlling any
data or mechanisms. When a node wants to carry out a transaction within the network, it
broadcasts the transaction. Then, several nodes (i.e., Validators) check to ensure that the
nodes involved and the transactions are valid, and then a block is made that consists of
the valid transactions.
Once the new block is deemed valid, it is added to the database. If the block is not
valid, the block is discarded. Therefore, it will not be added to the database. The transac-
tions and the block are signed, so that future transaction revocation or repudiation is im-
possible. The transactions are bundled in a Merkle tree [27]. Each block contains the hash
of the previous block in the chain. The very first block of the chain is called the genesis
block.
By network structure, blockchains can be classified into four categories: public block-
chains, private blockchains, consortium blockchains, and hybrid blockchains.
Public blockchains are fully decentralized, permissionless, and public, where every-
one can participate. This ensures that there is no centralized entity that controls the net-
work. Therefore, such a network has no single point of failure and no data monopoly.
Bitcoin [28], Ethereum [29], Litecoin [30], and USDF [31] are popular examples of public
blockchains. However, this type of blockchain suffers immensely from a scalability issue.
Achieving a consensus among a large number of nodes is generally slow.
A private blockchain network implies that the nodes need to be granted access to the
network and authenticated, hence “permissioned.” For example, Hyperledger [32],
Quorum [33], and R3 Corda [34] are all private blockchains. Many banks are shifting their
financial services toward utilizing private blockchains for more secure, faster processing,
with more transparent and lower-cost processes than traditional banking [35]. Although
private blockchains can provide more granular control over who belongs to the network,
they sacrifice some decentralization by introducing a network administrator to control
access. Nonetheless, the distributed data among the participating parties are still traceable
and immutable.
Private blockchains are highly scalable, the network size can be customized to match
the need, and new nodes can be added to the network as required. However, a centralized
identity and access management system is needed to implement access control to the net-
work and the data.
A consortium blockchain is a semi-decentralized blockchain where two or more par-
ties (e.g., financial institutions) manage the blockchain network. Banks and government
entities usually utilize this type of blockchain. Examples of this blockchain are Car-
goSmart [36] and the Energy Web Foundation (EWF) [37].
A hybrid blockchain is a combination of private and public blockchains. Only a se-
lected amount of information is allowed to go public while keeping the rest confidential.
The idea of incorporating both types is to keep part of the information private while al-
lowing more nodes to join the network for scalability. IBM Food Trust [38] is an example
of a hybrid blockchain.
Note that private blockchains, consortium blockchains, and hybrid blockchains are
permissioned blockchains that require authorized permissions to access networks and
data.

3.2. Consensus Algorithms

Consensus algorithms are required in distributed ledgers (i.e., blockchains) to get all
nodes in the system to agree on the content. When a node appends a block to the chain,
the other nodes should also append the same block to maintain blockchain integrity.
For example, in the Proof-of-Work (PoW) algorithm, all nodes complete solving a
mathematical puzzle. The puzzle selected by the Bitcoin community is to find a nonce that
hashes below a specific value. Whoever solves it first and broadcasts their block has it
J. Open Innov. Technol. Mark. Complex. 2022, 8, 185 6 of 44

appended to the chain. The process of verifying the nonce is computationally cheap.
Therefore, nodes can verify the new block and append it to their copy of the chain. In
PoW, the incentive for mining transactions lies in economic payoffs. Numerous alterna-
tive consensus algorithms have been developed for blockchains, namely Proof of Work
(PoW), Proof of Stake PoS [39], Istanbul Byzantine Fault Tolerant (IBFT), leader-free Byz-
antine consensus [40], implicit consensus [41], ELASTICO [42], Proof of Trust (PoT) [43],
Delegated Byzantine Fault Tolerant (DBFT) [44], Proof of Participation and Fees (PoPF)
[45], Proof of Vote (PoV) [46], Delegated Proof of Stake (DPoS) [47], and Delegated Proof-
of-Private-Stake (DPoPS) [48].
In this subsection, we briefly discuss Proof-of-Work (PoW) [28], Proof of Stake PoS
[39], Byzantine fault-tolerance (BFT) [49], and RAFT [50] to ensure the readers’ familiarity
with the consensus algorithms utilized in blockchain-based FinTech Applications.
Proof of Work (PoW): PoW [28] is the consensus algorithm adopted in the Bitcoin
blockchain. Under PoW, nodes (called miners in Bitcoin) solve a computational task to
generate a new block. The computational task is finding a value that, when hashed with
SHA-256, results in a number beginning with a pre-specified number of zero bits.
The difficulty of the task and the average work required are exponential in the num-
ber of zero bits required. The block can be verified by executing a single hash and added
to the chain. If most nodes add a block to their copy of the chain and then generate new
blocks pointing to it, this indicates a consensus that it is the correct next member of the
chain.
Assuming the majority of the nodes in the network are honest, PoW consensus is
resistant to Sybil attack [51], in which an attacker can acquire multiple identities (i.e.,
nodes) in a distributed system and use them to gain a significant influence (consensus).
PoW forces every node on the network, whether it is a malicious or honest node, to carry
out an equal amount of computational power. This makes it very difficult for an attacker
to alter a past block as they would have to redo the hash pointer of the block and all the
subsequent blocks to catch up with and surpass the work of the honest nodes.
A big problem with PoW is that computation of the hash wastes too many computing
resources. Many studies [52,53] worked on improving the original PoW mechanism. For
example, SPECTRE [54] is a consensus protocol that allows a parallel block creation on the
block direct acyclic graph (BlockDAG). This operation improves the transaction through-
put and reduces the confirmation time of Bitcoin.
Bitcoin-NG (Next Generation) [55] is another example of a leader-election PoW con-
sensus protocol. Bitcoin-NG introduces two types of blocks: key blocks and micro blocks.
Key blocks are only used for the leader’s election. Once a key block generated by a node
is accepted, it becomes the leader. The micro block contains the packaged transaction data
and ledger entries. Thus, transactions can be processed continually until the next leader is
elected, significantly reducing transaction confirmation time and improving scalability.
The Greedy Heaviest-Observed Sub-Tree (GHOST) [56] consensus algorithm follows
the heaviest sub-tree rule when appending blocks to the chain to eliminate double-spend-
ing [57] attacks on Bitcoin. This rule is more secure than the longest chain rule as it is
independent of the size of the blocks or the block creation rate.
Proof of Stake (PoS): In PoS [39], validators are selected based on the number of coins
that the validator stakes. The nodes having more stakes will have a higher opportunity to
add the next block to the chain. A new leader is elected using random criteria based on
the amount of stakes that a node (i.e., miner) possesses. Ouroboros [58] and Casper [59]
are examples of PoS algorithms.
Ethereum 1.0 utilized the PoW consensus protocol. Later, in Ethereum 2.0, PoW was
replaced by Proof of Stake (PoS) to increase the network’s scalability and power efficiency.
Byzantine fault-tolerance (BFT): BFT [49] is called Byzantine as the algorithm can
cope with some fraction of “Byzantine nodes”—nodes that are faulty and behave arbitrar-
ily. They can lie or intentionally mislead other network nodes, delay message delivery,
and cause disruption. Examples of BFT protocols are Trinity [60] and Exonum [61].
J. Open Innov. Technol. Mark. Complex. 2022, 8, 185 7 of 44

Reversible Addition-Fragmentation Chain-Transfer (RAFT): The RAFT algorithm

[50] achieves consensus through an elected leader responsible for log replication to the
followers, where followers blindly trust their leader. A follower node becomes a leader
candidate if it receives no communication from its leader over an election timeout period.
Quorum utilizes RAFT as its consensus algorithm.
Istanbul Byzantine Fault Tolerance (IBFT): IBFT[62] is a proof-of-authority Byzantine
fault-tolerant consensus protocol. It uses a group of validators to ensure each proposed
block’s integrity. The majority (around 66%) of these validators must sign the block before
it can be added to the chain. The group’s leadership also rotates over time, ensuring that
a faulty node cannot have long-term effects on the chain. Validators do not assume that
all leaders are trustworthy or honest and do multiple rounds of voting to arrive at a con-
sensus.

3.3. Smart Contract

A smart contract is an innovative way to trigger a “contract” program where the de-
posited cryptocurrency is transferred when a predetermined condition or set of conditions
is met. Smart contracts are contractual clauses that have been converted into lines of code
that can be run on top of a blockchain.
The purpose is to embed the contractual clauses into a blockchain such that they can
be enforced automatically. Smart contracts reduce the risk of contract violation, decrease
cost and increase trading efficiency [63].
Smart contracts adhere to the immutability of the blockchain, meaning that they can-
not be altered once issued. Behaviors that violate the contract, such as financial fraud, can
be avoided in some cases.
The elimination of a third party allows an automatic settlement of financial transac-
tions, improving businesses’ efficiency in addition to reducing turnaround time and re-
moving the need for reconciliation between parties (i.e., cross-border banks) that speed
up transactions and the settlement of trades for FinTech companies.

3.4. Digital Wallets

Digital wallets are financial applications that allow users to store public and private
keys for their cryptocurrency transactions. Based on internet connectivity, blockchain-
based wallets can be categorized into cold and hot wallets.
A hot wallet is always connected to the internet and cryptocurrency network. It is
used for day-to-day transactions. Cold wallets are called “vaults.” They are not connected
to the internet and allow users to store cryptocurrencies with a higher level of security.
Cold wallets are less convenient for active traders as they have to move the amount of
cryptocurrency to a hot wallet or power on cold wallets and connect them to the internet
to carry out transactions.

3.5. Blockchain Platforms Adopted in Financial Services

FinTech companies are shifting towards blockchain-based financial services for secu-
rity, scalability, and efficiency compared with traditional financial services.
Table 1 summarizes the five main properties of blockchains critical to FinTech.
J. Open Innov. Technol. Mark. Complex. 2022, 8, 185 8 of 44

Table 1. Properties of blockchains.

Characteristics Description
No longer need a third party to verify transactions on the block-
Decentralization chain. The network does the verification of these transactions us-
ing a consensus algorithm [64]
Blockchains employ asymmetric-key crypto algorithms and hash
Security functions. The chain stored in a distributed ledger makes it secure
[65]
The chain ensures that all the blocks are connected where every
block contains its hash and the previous block’s hash and, there-
Data integrity fore, cannot be changed. The network would detect any modifica-
tion. The chain is thus an immutable ledger that cannot be ma-
nipulated [66]
All transactions are recorded and distributed; therefore, they can
Auditability be verified and traced, enabling transparency between nodes
within the blockchain network[66].
Blockchain can settle cross-border money transfers faster than
Fast Settlement traditional methods by eliminating the need for intermediaries’
verification and reducing the transaction processing time [66].

3.6. Description of Blockchain Platforms

In this subsection, we discuss and provide a comparative analysis of the current and
most popular open-source blockchain implementations. We start with Bitcoin. Then we
discuss Ethereum, Hyperledger Fabric, Quorum, and R3 Corda implementations.

3.6.1. Bitcoin
Bitcoin introduced the concept of blockchain to the world. It was created by Satoshi
Nakamoto [28]. It has been popular since its introduction and has enlightened many de-
rivatives worldwide.
It is a permissionless public ledger record, meaning that the ledger of all Bitcoin
transactions is accessible publicly and distributed to nodes worldwide. Since its creation
in 2008, many have argued that Bitcoin should be seen as a speculative commodity rather
than just a cryptocurrency.
The symbols used for bitcoin are BTC or XBT. BTC is short for Bitcoin. These abbre-
viations come from the International Standards Organization (ISO), which maintains a list
of internationally recognized currencies. The “X” indicates that the currency is not associ-
ated with a particular country. Many FinTech applications are built on the Bitcoin distrib-
uted ledger, where the transaction records can be easily verified. We discuss these imple-
mentations in detail later in this paper.

3.6.2. Ethereum
Ethereum was created as an alternative protocol to Bitcoin and allows for building
decentralized applications, writing smart contracts, and managing digital assets.
Ethereum is a permissionless, open-source blockchain platform [67]. Its smart contract
implementation and development kits are the most popular blockchain platform for de-
centralized applications [68].
Ethereum has a native digital currency called Ether (ETH) that has three primary
purposes: to settle transactions through the exchange of ETH and enable network opera-
tions by using ETH as currency to pay transaction fees and store value. Ethereum has the
largest enterprise ecosystem in the world [68], with an active technical community of over
300,000 developers and infrastructure experts coordinated by the Enterprise Ethereum
Alliance (EEA) [69], which is dedicated to promoting Ethereum adoption and comprises
J. Open Innov. Technol. Mark. Complex. 2022, 8, 185 9 of 44

the world’s largest companies such as Microsoft, JP Morgan, Accenture, ING, Intel, and
Cisco.
However, Ethereum has a few limitations in terms of scalability, smart contract vol-
atility, lack of a clear monetary policy, and some uncertainty with Securities and Exchange
Commission (SEC) regulations. The momentum of implementing Ethereum for financial
services comes from the blockchain’s smart contract capabilities and its heavy involve-
ment in decentralized finance. Ethereum 1.0 utilized Proof of Work (PoW) as its consensus
algorithm, resulting in around 40 transactions per second.
Later, Ethereum 2.0 [70] replaced PoW with Proof of Stake. Ethereum 2.0 has recently
become the preferred platform for FinTech because it can handle up to 3000 transactions
per second, which is faster and yet more efficient than Bitcoin or Ethereum 1.0.

3.6.3. Hyperledger Fabric

Hyperledger Fabric is an open-source consortium maintained under the Linux Foun-
dation and has more than 200 members from various global companies, including finan-
cial services, for example, Visa-integrated Hyperledger Fabric for Business-to-Business
(B2B) blockchain payments in 2018 [52]. Hyperledger Fabric enables blockchain adoption
for industrial applications as well.
The Hyperledger Fabric is a permissioned, private blockchain platform where the
participating nodes can transfer assets. The transactions are directed by Chaincode [71].
Chaincode is what executes the functionality of a smart contract within the Hyperledger
Fabric framework. The execution of the Chaincode creates the interactions between the
nodes and the shared ledger. All nodes within the network need to know and maintain
the identity of the other nodes.
There are subnetworks within the larger Hyperledger network, called channels.
Channels are restricted to a particular subset of the nodes. A channel can create its own
ledger that only maintains a record of its transactions and digital assets and can only be
accessed or viewed by nodes in that channel [35].
Hyperledger supports a Hardware Security Module (HSM) that is vital for managing
and protecting the digital keys and its modular architecture, which supports plug-in com-
ponents [32]. Hyperledger provides modified and unmodified PKCS #11 for key genera-
tion. PKCS #11 [72] is one of the Public-Key Cryptography Standards (PKCS).
Some implementations may suffer from a lack of transparency. This may lead to data
monopoly or tampering, in addition to the limitation in terms of scalability [73].

3.6.4. Quorum
Quorum is a permissioned version of the Ethereum blockchain. It was developed by
JP Morgan and was later acquired by ConsenSys. Since it is a permissioned blockchain,
nodes must be verified before entering the Quorum network. The consensus algorithms
used by Quorum are RAFT and IBFT in place of the PoW implementation of Ethereum 1.0
and Bitcoin. Privacy is preserved in Quorum as transactions are not visible to members of
the larger network. This is similar to Hyperledger’s channels, where some transactions
can only be visible to a smaller group of network nodes maintained on a smaller, private
ledger. Quorum is referred to as a free gas network, meaning that there is no “mining fee”
for transactions, and there are no cryptocurrency costs associated with its transactions
(i.e., Gas is set to zero) [74].

3.6.5. R3 Corda
R3 Corda is a private, permissioned, open-source software project that creates the
Corda Network [21]. The main benefit of Corda is that it eases managing contracts and
reaching agreements between parties, especially when there is not enough trust between
the parties by using smart contracts. Unlike Hyperledger or Ethereum, to achieve
J. Open Innov. Technol. Mark. Complex. 2022, 8, 185 10 of 44

consensus, it uses the idea of notary pools. The details of this consensus method can be
found in the introduction to the Corda Platform Whitepaper [75].
Corda focuses mainly on financial services to create a global independent network
and therefore abstracts away many of the typical blockchain structure’s components that
cause time and computational overhead. However, the full functionality of the Corda
blockchain platform can be achieved by utilizing the components provided by Hy-
perledger. In addition to the fast operational speeds provided by Corda, it also helps
FinTech companies optimize inter-company cooperation’s costs and efficiency, where
data can be shared only among permissioned nodes.
Quorum provides the fastest transaction throughput compared with the other block-
chains’ original implementations. However, it is less flexible.
Ethereum provides security with limited scalability and is less efficient (i.e., low
transactions per second) and thus does not apply to time-critical situations. Hyperledger
fabric conducts transactions much faster than Ethereum. This is expected since the latter
is based on a permissionless blockchain.
R3 Corda also has higher transaction rates than Ethereum 1.0 but has lower through-
put than Hyperledger Fabric. As mentioned before, a Hyperledger Fabric with its “plug-
n-play” components can be built to perform similarly to the Corda platform.
However, the highest transaction throughput was reported by Ethereum 2.0. There
is no standard yet when it comes to blockchain performance measures. Experiments are
limited by resources and often are focused on specific use cases. Therefore, these meas-
urements are not necessarily accurate.
Table 2 provides a comparative summary of the key characteristics of the top five
blockchain implementations.

Table 2. A comparison of the top five blockchain implementations.

Characteristics/Plat- Ethereum Hyperledger FabricQuorum R3Corda Bitcoin

forms
Platform A general platform Business- to- Busi- Financial- focused Financial- focusedA general plat-
Description for blockchain solu- ness centric block- DLT [77] (built on DLT [77] form for block-
tions chain modules [76] Ethereum) chain solutions
Governance Ethereum develop- Linux Foundation ConsenSys R3 Bitcoin develop-
ers ers
Blockchain Type Private/Public Private Private Private Public
Access Type Permissionless Permissioned Permissioned Permissioned Permissionless
Consensus PoW, PoS Multiple RAFTIBFT, PoA Own Implementa- PoW
Mechanism [78] tions (Nota-
ryNodes) [34]
Smart Contract Yes Yes Yes Yes No
Digital Currency Ethers and tokens No native asset, In- None Native token, XDC BTCorXBT
through smart con- ternal token [79]
tracts
Throughput (Trans- ETH1.040 [67] 300 [76] 750 [77] 170 [80] 7–10
actions/Sec) ETH2.03000 [70]

4. Fintech Background
This section discusses the difference between ‘Decentralized Finance’ (DeFi) and cen-
tralized finance (CeFi). Later we provide an overview of FinTech evolution.
It is important to differentiate between ‘Decentralized Finance’ (DeFi) and Central-
ized Finance (CeFi). Traditional finance fundamentally depends on the trust and confi-
dence of the intermediaries that centralize financial functions and resources. It is usually
referred to as centralized finance (CeFi). Decentralized finance (DeFi) emerged with the
J. Open Innov. Technol. Mark. Complex. 2022, 8, 185 11 of 44

promise of eliminating centralized governance and intermediaries, transforming tradi-

tional finance into a trustless and transparent protocol [81,82].
Three factors made DeFi possible [24]. First, Moore’s law is the principle that the
amount of data processing grows exponentially. Second, Kryder’s law is the principle that
the amount of data storage grows exponentially. Thirdly, there is an advancement in com-
munications bandwidth with a decrease in cost. This allowed advancements in AI, block-
chain and distributed Ledgers (DLT), Big data, and Clouds.
Fintech existed before blockchain technology, and the use of this term evolved with
time [83]. This may prove confusing. Fintech can be used for CeFi [84,85], utilizing the
evolution of traditional finance innovation using technologies such as instant messaging
and cloud computing to provide financial services, while others [86] use the term to indi-
cate the distributed technology (e.g., DLT, blockchains) used to provide DeFi services [87].
We shall use the latter meaning throughout our paper unless we indicate otherwise.
The development of FinTech experienced several different phases [88]. Although the
roots of FinTech can be traced back to the 19th century, we see that the term only gained
traction in the 21st century in concurrence with recent technological advances.
The first age of financial globalization is dated back to 1866, when trans-Atlantic cable
was used for the first time to verify signatures in banking transactions operating between
Paris and Lyon, France. In the late 1800s, consumers and merchants started to exchange
goods using cards for the first time in history. Charga-Plate was an early predecessor of
the credit card we know today. Charga-Plate is a small metal card. The transaction record
was made using an imprinting machine by pressing an inked ribbon against the card with
the embossed transaction information. In 1918, federal reserve banks established Fedwire
Funds Service to transfer funds by connecting all Reserve Banks by telegraph using a
Morse code system. In 1920, Keynes, in his famous book, “The Economic Consequences
of the Peace” [89], published right after World War I, took the lead in highlighting the
inter-linkage between finance and technology. In 1964, the Charg-It card was launched by
John C. Beggins to be used in a two-block radius of Flatbush National Bank in Brooklyn,
New York.
The second generation of FinTech, ”FinTech 2.0,” was marked by Barclays’ introduc-
tion of the first ATM. In 1974, the Equal Credit Opportunity Act was signed by President
Gerald Ford, prohibiting and punishing any creditor discrimination against consumers.
The year 1982 marked the birth of the first online brokerage, “E-Trade,” which allowed
the execution of electronic trades by individual investors.
FinTech 2.0 aimed to seamlessly integrate and combine customers’ financial needs in
one place. Fintech 3.0 was born on the heels of the economic recession. The financial crisis
of 2007–2008 started the disputable argument about who has the legitimacy to own and
provide financial resources. The crisis deteriorated public perception of and trust in banks.
The post-crisis strict regulations for FinTech 3.0 opened the market to new providers and
allowed open banking, which allows third-party companies access to financial data.
Fintech 3.0 marked the emergence of Bitcoin, followed by other cryptocurrencies us-
ing distributed ledger technology (DLT). Distributed ledger technology is also called a
shared ledger, where the recording of the transaction of assets is distributed across multi-
ple nodes. Thus, distributed ledgers have no central data store or administration function-
ality. The challenges brought by the global pandemic in 2019 marked the beginning of
FinTech 4.0 [90].
The COVID-19 pandemic increased the demands for digitization and decentraliza-
tion. BigTech platforms (e.g., Meta, Google, Amazon) have increased significantly during
the COVID-19 pandemic. These platforms have been able to reap the benefit of having a
large number of users through online payments, credit, insurance, and digital wallets.
Annual FinTech financing and investments by venture capitals, private equity, and cross-
border mergers and acquisitions reached $210 billion by 2021 [91]. They had been dou-
bling over the preceding years ($112 Billion by 2018). FinTech companies were brought
about due to the surge of the technological age.
J. Open Innov. Technol. Mark. Complex. 2022, 8, 185 12 of 44

Technology companies spotted this need and have jumped in to provide the archi-
tecture, software, and services that enable these financial institutions to continue to pro-
vide the services on computer-based platforms [92]. There are currently over 8775 finan-
cial services startups in the North American region, 7385 in Europe, the Middle East, and
Africa combined, and 4765 in the Asia–Pacific region [2]. FinTech companies have
adopted many technologies, starting with Artificial Intelligence (AI), Machine Learning
(ML), Deep Learning (DL), and Blockchain. Blockchain-based FinTech implementation
and application are the focus of this survey paper.
Blockchain-based applications for the FinTech sector were motivated by the block-
chain’s decentralized potential for finance. In this paper, we study the three main catego-
ries of FinTech services [26]: Payments Services, Deposits and Lending, and finally, In-
vestment Management Services. In this paper, these different services will be described as
segments within the FinTech sector.
Figure 2 shows a sample of the current FinTech companies within their assigned
FinTech Segment.

Figure 2. FinTech companies and segments.

J. Open Innov. Technol. Mark. Complex. 2022, 8, 185 13 of 44

The first segment is the Payments segment, which provides new and easier payment
methods without centralized authorities. For this reason, the payments segment continues
to be the largest segment of the FinTech space. The next most significant segment is the
deposits and lending segment. With application processes and background checks al-
ready being done online, this was a big avenue in which technology companies could
apply big data principles and find a way to streamline the loan and refinancing processes
even further to make them more accessible. Following deposits and lending, the invest-
ment management space is the next most significant and certainly more blossoming (as of
recent times) segment of the FinTech space. More novice investors are putting their money
into apps that help them to make investment and trading decisions. Investment manage-
ment companies allow the investing process to be more tangible and accessible and offer
a friendly and straightforward user interface. Each segment can be further broken up and
categorized by various companies’ services, goals, and specializations.
For blockchain-based FinTech, it is crucial to understand what exact services a com-
pany is attempting to provide in order to understand the core components of these ser-
vices. By understanding these components, one can formulate a plan to understand the
requirements for the technology within this space.

4.1. Payments Segment

Payment is currently the most significant segment that is continually growing larger.
A crucial reason for this growth is that access to mobile devices, data networks, and ap-
plications has allowed FinTech companies to lure traditional banking customers away
from legacy banking platforms. These applications then enable users to interact directly
with vendors, removing third-party brokers [26]. Companies focused on the payments
segment are now driving innovation to increase blockchain-based applications’ efficiency
and accessibility [93].
This segment can be broken up into categories that specify what services they offer
within the payment realm. Table 3 discusses the different payment segment categories
[26] and briefly describes the services and companies in each category.

Table 3. Payments Segment Categories.

Subsegment Services Companies

Consumer Payments Services and technologies Doxo, Headnote, Affirm,
that are focused on the pay- Paypal, Stripe, Zelle, Ripple,
ment between consumers Stellar
and payment issuers
Financial Transaction Companies that focus on se- Venmo (a service of Paypal)
Security curity within financial trans-
actions, such as securing
transactions, authenticating
users, and preventing overall
fraud/theft
International Money Transfer Companies that enable send- Remitly, Paypal, Ripple,
ing money (both personal SureRemit, Everex
and business) across coun-
tries
Payment Backend and Enabling payments by Circle, Stripe.
Infrastructure providing the infrastructure
to payment issuers and ac-
quirers
Point of Sale Payments Focused on payment acquir- Square, Algorand, Pauni-X
ers (businesses and
J. Open Innov. Technol. Mark. Complex. 2022, 8, 185 14 of 44

organizations) by providing
the infrastructure as well as
physical hardware for pay-
ment solutions

4.2. Deposits and Lending Segment

Deposits and lending is another huge segment in the FinTech space. The purpose of
this segment is to simplify the traditional banking flow. This includes storing the money
in the bank (i.e., deposits) and building interest on that money. It also incorporates com-
panies that enable people or businesses to obtain loans (i.e., lending) and monitor/collect
information about credit. We highlight the top three categories of the deposits and lending
[26] segment and provide exemplary services and companies for each category in Table 4.

Table 4. Deposits And Lending Categorizes.

Subsegment Services Companies

Business Lending Offering new ways for companies to as- Credifi, Peer IQ, Celsius, Fig-
sess their credit risk and raise ure, Colendi
financing for their debt
Consumer and Allowing businesses and consumers to J.P. Morgan & Co, Wells
Commercial Bank- interact with banking services more Fargo
ing simply and easily.
Consumer Providing new ways for people to ob- Salta, Tala, Avant, Celsius,
Lending tain loans and assess their credit risk Figure, Colendi

However, some FinTech companies can fit in more than one category based on their
services. These companies attempt to simplify the loan process by finding different ways
to assess credit risk. They provide various ways for companies to collect data and analytics
to simplify the background checking process and shorten the turnover time of loan appli-
cations and loan grants/rejections. PeerIQ[94] is an example of a company that provides
risk analytics and decision-making tools to help FinTech lending institutions to analyze,
access, and manage lending risk.

4.3. Investment Management Segment

The Investment Management segment of the FinTech sector is mainly comprised of
companies that attempt to invest in a simple automated process. These companies ease
access to various securities for those less familiar with finance. Table 5 highlights different
segments [26] of Investment Management companies. Example services and companies
for each segment are provided. Still, most FinTech companies provide one or more ser-
vices and, therefore, can fit within more than one category within the same segment. Table
5 highlights deposit and lending subsegments.

Table 5. Deposits and Lending Categorizes.

Subsegment Services Companies

Financial Businesses that enable people to make in- Addepar
Research and formed and better investment decisions
Data by providing information services
Institutional Directed towards managers Wealthfront, Betterment
Investing (wealth/hedge fund)and other profes-
sional traders, these businesses help man-
age portfolios to optimize their return on
investment
J. Open Innov. Technol. Mark. Complex. 2022, 8, 185 15 of 44

Retail Investing Companies that enable investing insecu- Robinhood, Webull, Interac-
rities with new methods and means. tive Brokers
These services are targeted toward newer
and younger investors.

5. The Payments Sector

The payments sector consists of three segments: retail and consumer payments, point
of sale payments, and international money transfers (remittances). This section discusses
six FinTech companies (Stellar, Ripple, Algorand, Pundi-X, SureRemit, and Everex), two
for each segment. We highlight how blockchain technology is leveraged to solve the sec-
tor’s problems.

5.1. Retail and Consumer Payments

This subsection discusses two retail and consumer payments FinTech companies,
Ripple and Stellar. With increased users in online shopping, ride-sharing, food delivery,
etc., payment methods have now moved away from in-person exchanges of money and
gravitated toward digitization.
Oliver Wyman, a leading international management consulting firm, proposed that
the payments space has become key for a seamless shopping experience that provides a
unique competitive advantage [95].
The ability to leverage blockchain allows customers to use cryptocurrency in their
transactions and allows a faster transaction settlement due to the reduction of centralized
verification.
Currently, many transaction fees are associated with traditional banking strategies
within the FinTech space. With the rise in payment solutions, technology experts have
been trying to leverage different mechanisms to alleviate these fees. For example, mer-
chants send batches of authorized transactions to their payment processors. A payment
processor allows merchants to handle customer transactions via various channels such as
credit/debit cards or bank accounts.
For every transaction, the card issuer charges the merchant a fee, and the payments
processor charges a fee to facilitate all of the background work to perform the transaction.
Therefore, the merchant has to pay additional fees to accept a customer’s payment. Ac-
cording to Square, the average cost for payment processing is about 2.87% to 4.35% per
transaction [96].
Along with transaction fees, the intermediaries (i.e., payment processors) create time
delays during the transaction. Each intermediary has to process and validate the transac-
tion, then send it to the next intermediary to process. Each intermediary processing the
transaction increases the transaction time. This is not only inefficient but also poses a risk
for fraud.
Blockchain payment solutions can eradicate transaction fees, allowing customers and
merchants to settle transactions without intermediaries. Most existing payment solutions
attempt to find the path with the least intermediaries to reduce cost.
Most blockchain payment methods can remove transaction fees by using smart con-
tracts to remove all the intermediaries and decrease the time spent at each intermediary.
Removing all intermediaries (e.g., permissionless blockchain) or reducing the num-
ber of intermediaries (e.g., permissioned blockchains) gets rid of high transaction fees and
reduces transaction times.
Another challenge in this category is the transaction error rate and lack of transpar-
ency. Errors in transactions within payment processing occur for many reasons. Some-
times there can be issues with the physical condition of the card, whether or not there is
money in the card holder’s account or even the merchant’s terminal. There can be a lack
of authorization, a duplicate charge, or even an incorrect amount charged [97]. As the
J. Open Innov. Technol. Mark. Complex. 2022, 8, 185 16 of 44

transaction passes through so many intermediaries, it is problematic to localize the step

where an error occurs and thus troublesome to recover the loss.
Blockchain allows the entirety of the transaction to be transparent and immutable.
Therefore, if one of the transaction participants is fraudulent, it is evident and easy to
localize the fraudulent transactions.
Furthermore, the consensus mechanism that governs most blockchain payment so-
lutions ensures that errors are minimized or eliminated. A lack of traditional financial
services is the main issue that small-to-medium businesses face.
That is because they are not connected to a large financial institution. This is quite
common in countries that lack the infrastructure to support large financial institutions but
have many small-to-medium banks. These small-to-medium banks lack the same services
as their larger counterparts or cannot conduct currency conversion. Without some basic
services, merchants have difficulty processing and conducting electronic payments.
Blockchain enables small-to-medium banks to operate internationally by connecting
them to larger financial institutions and banks worldwide. This way, when paying with
fiat money or cryptocurrency, the transaction can travel through many intermediaries
within the blockchain network. Thus, small-to-medium businesses can conduct the same
transactions that larger businesses can do with large banks. This has opened up commerce
in many areas of the world.

5.1.1. RippleNet
RippleNet is a network of financial entities such as banks, payment providers, and
other financial institutions [64]. RippleNet routes payments among the financial institu-
tions on their network to settle transactions. The network itself is a decentralized global
network that uses a Ripple-developed consensus protocol to validate account balances
and transactions within the network. The network keeps track of all the transactions that
occur and are publicly recorded and viewable. RippleNet uses Ripple Cryptocurrency,
XRP. By having banks and payment providers within the network, Ripple removes the
fragmentation within the payments processing landscape. Fragmentation results from the
lack of interconnection between multiple securities markets. It can reduce the effective-
ness of mass marketing techniques, erode brand loyalty, and result in customer orders
being directed to markets that do not necessarily offer the best price.
Ripple’s solutions have opened up many services for small-to-medium banks and
merchants, especially in countries with little financial infrastructure. RippleNet’s integra-
tion allows small banks and merchants to complete transactions.
Access to the network allows these previously challenged companies to complete
cross-border transactions and allow different payment services locally. It also allows Rip-
ple’s financial partners to reach many customers that they would not have been able to
reach before due to the lack of infrastructure.

5.1.2. Stellar Network

The Stellar Network is a peer-to-peer payments network that originates from the
early iterations of the XRP Ledger developed by Ripple. Stellar’s consensus protocol (SCP)
utilizes smart contracts to carry out transactions [98].
It uses the Quorum blockchain to emphasize security and speed up transactions
within the network by utilizing the slices. A Quorum slice is a subset of nodes on the
network that a given node chooses to trust and depend on [99].
Stellar allows each node to choose what node is within its “trusted zone” (slice), en-
abling open participation and more jurisdiction over who is validating the transactions,
leveraging the trust built through interpersonal interactions.
Interpersonal interaction is the communication that occurs between interdependent
nodes that have some knowledge of each other. However, to reach a global consensus,
there have to be intersections between Quorums—meaning that one node in the Quorum
slice must also be in another Quorum slice to maintain the integrity of the network. This
J. Open Innov. Technol. Mark. Complex. 2022, 8, 185 17 of 44

allows the network to reach a consensus without relying on a centralized/closed system.

Quorum slices allow transactions to be accepted quicker by the nodes in the Quorum, thus
increasing the speed at which the transactions are carried out.
Since the protocol also allows an open network, there are many ways to decrease the
number of intermediaries the money travels through, thus providing shorter options that
decrease transaction fees. Quorum slices play a significant role in ensuring the security of
each node and the validity of transactions. Table 6 compares and summarizes the solu-
tions provided by RippleNet and Stellar Network.

Table 6. Retail And Consumer Payments Chart.

Problems Faced by Fi-

Solutions Provided by Solutions Provided by Ripple’s Current Im- Stellar’s Current Im-
nancial
Ripple’s Blockchain Stellar’s Blockchain plementation Issues plementation Issues
Institutions
High Transaction Fees RippleNet finds theThe Stellar consensus Ripple charges quite a Stellar charges fees in
and Time Delays most efficient (time
protocol utilizes bit for transactions that their native currency,
and cost) path through
Quorum slices to en- take place on Rip- Lumen, which has
its network of banks to
sure that transactions pleNet. XRP can re- proven to be highly
complete the transac-
can be validated in a duce transaction times, correlated with the
tions. matter of seconds with but they are still too price of Bitcoin [98].
the least amount of feeshigh. Cross-border Therefore, it can be
possible. payments need to be volatile. If the transac-
faster. tion needs to be con-
verted into multiple
currencies, the transac-
tion time can increase
Errors in Transactions Blockchain implemen- The Quorum Intersec- - Because of the consen-
tation provides trans- tion ensures that a gen- sus protocol, there
parency through DLT eral consensus is made have been cases of er-
by information redun- such that there are no rors occurring when a
dancy and transaction errors in deductions transaction starts with
immutability that is from accounts. insufficient funds or
visible. due to nodes being of-
fline
Lack of Transparency - A decentralized, im- Ripple is centralized as -
mutable blockchain a majority of the nodes
system provides trans- belong to Ripple. Thus,
parency. the possibility of com-
plete transparency is
not possible.
Lack of Traditional Fi- RippleNet connects Stellar connects banks There may not be a -
nancial banks through its infra- across the world in a bank in that country of
Services (Small-to-Me- structure so that small- public manner. This interest that has
dium Banks) to-medium banks can means that anyone can enough money to com-
complete cross-border join the Stellar net- plete large transactions
transactions. work. as not many well-
funded large banks are
part of the RippleNet.
J. Open Innov. Technol. Mark. Complex. 2022, 8, 185 18 of 44

5.2. Point of Sale Payments

This segment focuses on the actual place and technology used when a consumer ini-
tiates transactions for goods and services provided by a merchant. Point of Sale payments
can be online or in-person.
This facilitates the transactional process from customer to merchant. It can also pro-
vide order management, inventory tracking, and card payment processing services.
One of the main issues faced by the point-of-sale segment is the high fees. That is
because the point of sale systems are often physical devices in stores that can vary from
cheap to costly. Whether or not a merchant buys or rents their hardware and software,
there is still a non-negligible upfront cost. On top of the existing system, most points of
sale vendors charge payment processing fees. Some vendors will allow the merchant to
work with a third-party credit processor or require the merchant to pay some fee per
transaction.
Other vendors also enforce processing service fees. These fees accumulate over time,
and the merchant loses quite a bit of profit to fees. To cover these fees or the cost of the
point-of-sale system, merchants often charge the customer a fee for processing the trans-
action. A point of sale operating within a blockchain framework can prevent processing
fees regarding payment. The payment is quickly processed on the network itself. In addi-
tion, blockchain provides transparency, so merchants and customers can see all fees asso-
ciated with the transaction.
Another issue is scalability. Since the point of sale systems tend to have physical de-
vices in stores or online payment systems, the ability to scale is somewhat limited. Mer-
chants fear many taxes and fees associated with credit card providers in addition to the
allowed transaction rate in a given time frame. Maintaining large amounts of information
is another challenge. Currently, traditional point-of-sale systems are required to maintain
several databases and store information of various parties they need to connect with.
The information that needs to be stored relating to customers, such as billing, ratings,
and orders, can be stored on individual nodes within a blockchain. Additionally, inven-
tory can be stored on nodes across the chain. Alternatively, the network can be built on
top of a decentralized database that can be accessed by nodes when needed. Smart con-
tracts can then trigger processes regarding incoming data and ensure that transactions
between existing and new nodes are complete and valid. This ensures security, as there is
no one centralized database that can be tampered with [100].

5.2.1. Algorand Blockchain

The Algorand blockchain is a payment solution with its point-of-sale implementa-
tion. Their application acts as a point of sale and communicates with a crypto wallet con-
taining its currency (‘Algo’) through a transaction gateway. The Algorand process starts
with an application that captures the transaction details and creates an unsigned transac-
tion that is then sent to the transaction gateway. The transaction gateway forwards it to
the wallet. The signing wallet receives the unsigned transaction and waits for approval
from the consumer. The transaction gets signed and returned to the gateway if the con-
sumer approves it.
The entire receipt is stored in an off-chain storage system—essentially recording the
transaction in an immutable manner so it can be retrieved when needed [101]. The storage
system eliminates the need for data to be managed by the point of sale system/application
as it is stored on an off-chain system. That way, all the data can be managed and retrieved
at any time. The Algorand blockchain uses a pure PoS consensus algorithm that requires
minimal computation.
The Algorand blockchain can handle around 1000 transactions per second [102]. This
increases efficiency, allows the blockchain to scale more rapidly, and significantly reduces
settlement times.
J. Open Innov. Technol. Mark. Complex. 2022, 8, 185 19 of 44

Additionally, since the blockchain operates within its own network (from the point
of sale application to the gateway into the wallet), there are no outside transaction fees associated
with intermediaries in the transaction. The point of sale solution relies entirely on Al-
gorand’s currency, ’Algo.’ Limiting to one currency poses a threat to scaling as it forces
consumers to make an initial investment in Algos to carry out the transactions.

5.2.2. Pundi-X
Pundi-X is an end-to-end platform that allows consumers to use cryptocurrency at
retail points of sale [103]. Consumers must have a mobile wallet to use the platform. The
mobile wallet maintains the public key encryption behind a standard password-based
system to be user-friendly.
The platform also allows for “physical” smart card information to be loaded by the
mobile app and allows the currency to be used even without access to a smartphone. Alt-
hough Visa and Mastercard have networks that enable using cryptocurrency as payment
through conversion to a fiat currency, the issue is that not all locations worldwide have
access to these services.
Pundi-X targets under-serviced countries where it allows merchants and users to
begin to transact more digitally. Pundi-X is currently marketing in Indonesia, giving a
hardware device to merchants in retail environments when a smartphone is available.
Merchants can carry out their transactions on a smartphone-based application as well.
The merchant sets all the rates required for the transaction at about 1–2%. 65% of that
fee is given to the merchant, while the rest is given to Pundi-X or the digital asset issuer.
Though this does not eliminate third-party fees, merchants still control the fee being
charged.
The merchant is also very aware of who is receiving the fees. With the rise of digital
assets, the Pundi-X platform enables people to use some of their investments to pay for
goods. Most cryptocurrencies can be used on the Pundi-X platform. The platform is open,
allowing digital assets to be submitted and evaluated on the possibility of being used as
currency.
This enables long-term scalability as it allows the platform to start incorporating pop-
ular digital assets and opens up accessibility to various regions of the world. Furthermore,
Merchants can choose whether to accept their payments in fiat currency or a stablecoin. A
stablecoin is a crypto asset that is backed one-to-one by the U.S. dollar or other fiat cur-
rencies. Therefore, if a consumer chooses to pay with a more volatile coin, the merchant
controls the currency in which they receive that payment. This has been very interesting
for institutional players as it allows consumers to trade crypto at the institutional level.
A volatile coin is a cryptocurrency whose value and price fluctuate heavily by inves-
tor and user sentiments, government regulations, and media hype. On the contrary, sta-
blecoins are unaffected by market volatility.
Pundi-X allows customers to keep their investment in stablecoins that remain in the
digital assets space whenever the markets become volatile instead of selling all cryptocur-
rencies and moving to cash until they return to trading actively.
An issue for scalability may arise as the ledger needs to maintain much more infor-
mation than just a simple transaction, especially if it is being used to calculate inventory
for a merchant. Therefore, this large data storage could affect scalability and transaction
time. Additionally, scalability comes into question when it is realized that a physical of-
fline device is needed to scale the platform’s use as a whole. Therefore, since the XPOS
machine is acting as a node, there will be slow growth when the adoption process is slow.
Figure 3 summarizes the issues faced by financial institutions within the point-of-sale
subsegment. In Tables 7 and 8, we summarize the solutions provided by Algorand and
PaundiX.
J. Open Innov. Technol. Mark. Complex. 2022, 8, 185 20 of 44

Figure 3. Issues faced by financial institutions within the point of sale subsegment.

Table 7. Point Of Sale Payments Chart.

Problems Faced
Solutions Provided by Solutions Provided by Algorand Blockchain PundiX XPOS Imple-
by Financial
Algorand PundiX XPOS Implementation Issues mentation Issues
Institutions
High Fees The fast transaction Merchant sets the fee Since the transaction fee The merchants set the
times incur fewer trans- rate (between 1–2%) is 0.001 Algo/transac- service fee rate, which
action fees. Thus, the and gets 65% of the ser- tion, if the price of Algo can be between 1–2%; it
high transaction fees as- vice fee. The rest of the increases, the transac- is not standardized.
sociated with standard service fee is given to tion fee can also in-
credit cards are Pundi X or the digital crease.
avoided. asset issuer.
Settlement Processes transactions Transactions occur al- - -
Time within 5s such that the most instantly– in less
smart contracts execute than half a second.
and settle the transac-
tions as fast as possible.
Fraud Due to real-time settle- The immutable transac- - -
ment and immutable tions are recorded
transactions, it is hard within the PundiX
to initiate and complete blockchain.
fraudulent transactions.
Rise of Digital - Pundi Xwallet allows Users need to have a Users need to create an
Assets the management of dig- signing wallet linked to XWallet to use the
ital assets and links their Algorand account. XPOS terminals. To use
with a card called XPass The only crypto asset al-the XPass, they must
that can be used with lowed to be used is also link their card to
XPOS machines. The Algo. the XWallet.
Open Platform allows
digital assets to be sub-
mitted to PundiX for
use on the PundiX plat-
form for scalability in
terms of incorporating
popular digital assets as
payment. Merchants get
paid in fiat currency or
a stablecoin of their
choice to avoid the risk
of cryptocurrency vola-
tility.
J. Open Innov. Technol. Mark. Complex. 2022, 8, 185 21 of 44

Table 8. Point Of Sale Payments Chart.

Problems Faced
Solutions Provided bySolutions Provided byAlgorand BlockchainPundiX XPOS Imple-
by Financial In-
Algorand PundiX XPOS Implementation Issues mentation Issues
stitutions
Scalability The Algorand block- The PundiX XPOS runs There have been issues Each XPOS terminal is a
chain can process within the PundiX block- with the consensus algo- node. It has not been de-
1000transactions/second. chain ecosystem. There- rithm. When one node termined whether the
This increases efficiency fore, the XPOS will scale has too much stake—the PundiX blockchain can
and the ability to carry with that of the block- other nodes cannot form manage a large number
out more transactions chain as it acts as a node a consensus. of nodes.
with security. It uses a within the blockchain.
Pure Proof of Stake con-
sensus mechanism—
meaning that the only
factor that affects the
block creator is the num-
ber of Algos held by the
participant. This in-
creases speed while
maintaining decentrali-
zation.
Large Amounts Algorand implements A receipt is printed at Blockchain transaction One would need to use
of Information off-chain storage,essen- the terminal containing storage is limited, so a the PundiX interface to
tially a decentralized file the transaction infor- third party must act as see the transactions
storage system that en- mation maintained an intermediary between made. A large amount of
crypts the data and within the PundiX block the point of sale applica- data storage can affect
makes the content immu-chain. tion and the blockchain. scalability and transac-
table. Open-source solu- This can cause delays, er- tion time.
tions such as Interplane- rors, and efficiency loss.
tary File System or other
commercial file systems
can be used.

5.3. International Money Transfer (Remittance)

Blockchain has revolutionized cross-border payments. Several companies (such as
Ripple, Everex, SureRemit, etc.) have capitalized on using blockchain for remittance.
This subsection discusses the current issues faced by the remittance international
money transfer segment and reviews how Everex and SureRemit solve these issues. Cur-
rently, the remittance market is dominated by the Society of Worldwide Interbank Finan-
cial Telecommunication (SWIFT).
SWIFT is a network of banks that connects all corners of the world. For a transaction
to be completed, the transaction must go through a clearing or settlement center before
the transaction is cleared.
SWIFT itself does not settle the transaction. It simply confirms the consumer’s trans-
action request. It is up to the banks to settle the transaction and relay the confirmation
back to SWIFT so both sides can acknowledge the transaction’s completion [104].
For a cross-border transaction to be executed, it has to pass through several banks
because not all banks operate with a large variety of fiat currencies in other countries.
Thus, a route between banks must be established to allow currencies to be exchanged into
the desired receiving currency.
J. Open Innov. Technol. Mark. Complex. 2022, 8, 185 22 of 44

Blockchain can speed up the cross-border transaction time as a decentralized ledger.

The transaction is settled almost as soon as the payment is made. By bypassing third-party
intermediaries, sending money globally via blockchain reduces settlement time signifi-
cantly.
Risk is another major issue while using international currency. The exchange rates
for various fiat currencies change quite sporadically. Therefore, the long settlement time
poses the risk of changing its value from when it is sent to when it is settled. Furthermore,
most banks have a clause in their remittance contract that disclaims liability if the trans-
action remains incomplete. Thus, the risk is undertaken primarily by the person who ini-
tiates the transaction (the sender of the money).
A blockchain architecture mitigates the risk associated with currency exchange rates
as the transactions are settled in real-time. Thus, the value sent is likely to be completed
with minimal conversion rate changes. The lack of financial inclusion and infrastructure
is another issue.
Finding a bank that operates with the desired country’s currency would result in us-
ing many intermediary banks that increase the transaction’s cost. Additionally, as some
countries do not have the financial infrastructure, some people do not have bank accounts.
Without a bank account, it is hard for money to exchange hands without physically hand-
ing the money to the desired recipient.
By using blockchain solutions, it does not matter whether or not the country has a
bank connected to the rest of the world. It simply relies on the Internet and the conversion
between cryptocurrency to the fiat currency of that country. Furthermore, some block-
chain companies have taken an interest in the lack of infrastructure in underbanked pop-
ulations and are finding ways for money to be exchanged and used within the country of
that region. The cost of compliance is increasing due to the varying regulatory environ-
ments.
Compliance refers to the operational efficiency and reliability of the money being
moved safely to the recipient. With the current SWIFT system, it is hard for the sender to
track the transaction as it passes through many third-party financial institutions before it
reaches the desired recipient. The transparency provided by the blockchain gives the
sender the ability to track the transaction’s path.
The interoperability between countries becomes another delay aspect when attempt-
ing to complete the transaction. Different countries require different amounts of infor-
mation for transactions to be processed.

5.3.1. SureRemit
SureRemit [105] is a blockchain platform started by the makers of Suregifts. SureRe-
mit provides cashless remittance services for cross-border businesses. The Remit token
(RMT) can be used within the platform to pay bills and access vouchers. Customers can
select the country to which they want the money to be sent, look for the category, and thus
create a voucher that can be sent via text and email. These vouchers freeze the tokens.
When the voucher is used, the merchant gets paid in their fiat currency or RMT [105].
The Remit Token is not subject to the volatility of exchange rates; therefore, what the
sender sends is what the receiver will receive [106]. By utilizing vouchers sent over SMS
and email, SureRemit breaks through the barriers created due to a lack of financial infra-
structure. A customer does not need a bank account in the country of origin to pay and
send vouchers. However, one drawback to using RMT vouchers when paying the mer-
chant is that it is required for the merchant to be partnered with SureRemit. This creates
an issue in places where merchants are not willing to partner with SureRemit. SureRemit
leverages the Stellar platform and also partners with merchants to allow transactions to
bypass different regulatory environments, as the RMT tokens can be converted into fiat
currency via the Stellar platform. Furthermore, by using the SureRemit blockchain, the
sender is cutting out banking intermediaries.
J. Open Innov. Technol. Mark. Complex. 2022, 8, 185 23 of 44

The minimal fees charged by SureRemit are very small compared to SWIFT fees for
cross-border money transfers. Additionally, the transaction time is much faster, as Stellar
transactions, on average, take 5 seconds to process without the need to interact with sev-
eral intermediaries. Thus the risk associated with changing conversion rates does not pose
a threat.

5.3.2. Everex
Everex aims to achieve financial inclusion of the underbanked [107] as it enables wal-
let-to-wallet interactions through its cryptocurrency ”Cryptocash.” Cryptocash is an
Ethereum-based token. Each unit of Cryptocash is backed by the fiat currency it repre-
sents. Cryptocash balances are underwritten by third-party cash custodians that allow us-
ers to convert their fiat currency into Cryptocash. They then can exchange and transfer
the Cryptocash via blockchain. This allows Everex to obtain its goal of financial inclusion
and avoid the volatility of current, non-stablecoin cryptocurrencies. Since the Everex to-
ken is a “fiat”-pegged stablecoin, the money being transferred is equivalent to the same
fiat currency that is being transferred—without needing to be converted multiple times
into various currencies. This poses a risk because the conversion from eFiat (Cryptocash)
to fiat is subject to conversion rates and can be volatile. Furthermore, for transactions to
occur, Everex needs international trusted banking partners to provide a 1:1 conversion
rate. This can limit geographical inclusion as it depends on the existing financial infra-
structure. If a banking partner does not exist in a region, the eFiat money cannot be re-
deemed and converted into fiat money.
Summary: This section discusses how blockchains allow Stellar and Ripple to make
payments promptly and cost-effectively. We highlighted that RippleNet and the Stellar
Network differ in their use cases. The Ripple network was built to provide liquidity solu-
tions to larger institutions, while Stellar’s goal is to provide payment solutions on a
smaller scale and facilitate global financial inclusion. The distributed ledger technology
enables transparency of transactions and guarantees immutability, leaving a permanent
record of transactions that have taken place. This opens up banking services to unbanked
populations in certain countries. The Pundi-X and Algorand blockchain implementations
leverage the blockchain architecture to have a point-of-sale system for underbanked and
under-serviced populations, allowing sales for both merchant and consumer to be more
accessible and less costly. The most common problems with remittance are the cost and
time it takes for international transactions to complete. SureRemit and Everex solve these
problems by utilizing the blockchain architecture and enabling nontraditional ways of
sending money. They each approach the issue differently. However, both use the archi-
tecture to lower costs due to fees, reduce the time of the transaction, as well as to work
around regulatory environments, and serve underbanked populations, which tend to be
the main targets of remittance.
Tables 9 and 10 compare and summarize the solutions provided by SureRemit and
Everex
J. Open Innov. Technol. Mark. Complex. 2022, 8, 185 24 of 44

Table 9. Remittance/International Money Transfer.

Issues Faced by
Solutions Provided by Solutions Provided by SureRemit Blockchain Everex Blockchain Im-
Financial Insti-
SureRemit Everex Implementation Issues plementation Issues
tutions
Lack of Finan- SureRemit does not need Everex partners with Merchants must be part- Everex needs to have li-
cial Inclusion a bank account on the re- banks targeting un- nered with SureRemit censed exchange part-
ceiving side to use the derbanked populations and accept tokens. ners in the country of re-
voucher that is sent—the and allows workers to ceipt to exchange tokens
receiver simply needs a send money home with- into local currency.
mobile phone to be able out paying high remit-
to use the voucher. tance fees.
Cost of Compli- SureRemit leverages the - The Token can only be -
ance Among Stellar platform and also used to make purchases
Different Regu- acquires partner mer- with partner merchants.
latory Environ- chants to bypass differ- Therefore, the money
ments ent regulatory environ- cannot be used if a part-
ments altogether by set- ner merchant does not
tling Remit tokens with accept the Remit token.
fiat currency via Stellar.
Interoperability SureRemit has standard- Everex has trusted bank- - For the stable coins to be
ized the process regard- ing partners in the coun- redeemed in Fiat cur-
less of country. The same tries they interact with, rency, Everex must have
information is required thus promising a 1:1 con- local banking partners
no matter where or with version rate of their eFiat that operate within that
whom the transaction is stablecoins. currency. Otherwise, the
placed. eFiat cannot be sent/re-
deemed.
Risk RemitToken is not sub- The Everex Token is a The stablecoins used by -
ject to the volatility of dollar-pegged stablecoin, Everex when redeemed
currency exchange rates. ensuring that the money from eFiat to fiat are sub-
Immediate and continu- being transferred is ject to conversion rates
ous liquidity provided equivalent to the same that can be volatile.
by Stellar allows for the fiat currency that is being
issuance and trading of transferred.
tokens immediately.
Therefore, they are not
subject to the risk of ex-
change rates.

Table 10. Remittance/International Money Transfer.

Issues Faced by
Solutions Provided bySolutions Provided bySureRemit BlockchainEverex Blockchain Im-
Financial Insti-
SureRemit Everex Implementation Issues plementation Issues
tutions
Fraud and The blockchain ledger is The blockchain ledger is Remit Tokens are sent -
Transparency publicly verifiable and publicly verifiable and via a “voucher” outlin-
immutable. It will con- immutable. It will con- ing what the tokens are
firm whether the correct firm whether the correct to be used for. This re-
parties sent and received parties sent and received stricts the voucher from
the money. the money. being used with only
specific merchants.
J. Open Innov. Technol. Mark. Complex. 2022, 8, 185 25 of 44

Transaction/Set- Stellar transactions take 5 Ethereum transactions - The Ethereum block-

tlement Time seconds to process using take upwards of 1min to chain has longer transac-
Delays. the Remit Token instead settle using the eFiat to- tion times than other
of fiat currency. There ken. Since there are no platforms, which
are no intermediaries intermediaries, the ac- could cause an issue
when sending Tokens count is credited based considering conversion
around the world. on the speed of the rates.
Ethereum blockchain.
Transaction Fees By cutting out banking The transaction fees are - -
intermediaries, transac- removed due to the
tion fees are also re- transfer of eFiat stable
moved. There is a 0–2% coins bypassing banking
fee when sending using intermediaries. Wallet-
SureRemit, which is sig- to-Wallet interactions
nificantly less than the have no fees associated
standard 7–14%. with them.

6. Deposits and Lending

Deposits and Lending is a segment of the FinTech industry that relies on companies
enabling people to obtain loans and monitor and collect information about their credit.
This section focuses primarily on the Lending aspect of this segment as it has the largest
application within the blockchain [26] and provides an overview of Colendi, Figure, and
Celsius Fintech companies.
Blockchain can speed up verification processes by simplifying and breaking down
barriers to obtaining a loan and even allowing other people to lend money without the
risk of not knowing who they are lending to. Businesses and consumers can use block-
chain-aided platforms to initiate transactions and loans guaranteed through the ledger’s
transparency and immutability.
Furthermore, blockchain has yet to reach a stage where it can support large business
loans. Therefore, blockchain companies specializing in loans and deposits target many
small businesses and personal loans. Small business and personal loan companies that
utilize blockchain have leveraged the architecture in several ways.
Colendi uses blockchain to perform credit assessments, Figure uses blockchain to
provide credit-based loans, and Celsius uses blockchain to provide crypto-based loans.
However, within this segment, the problems that are encountered are relatively the
same—the solution by each company is what differs.
One of the main issues in the small business and personal loans sector is the high
fixed costs. Traditional loan approval is a lengthy process that involves several credit
checks, background checks, paperwork, and other processes that often require the use of
third-party intermediaries. These third-party intermediaries accrue costs that often have
to be paid for by the customer who is taking the loan.
The fees are high, and often personal loans can be a significant barrier because the
customer may not be able to afford them. Furthermore, the transaction fees from obtaining
the loan and the administration fees associated with the loaner of the money also drive up
the overall price of the loan—making the person or customer borrowing responsible for
paying back a lot more than the amount that they require in the loan.
Blockchain has the capability of solving these problems by providing a clear and di-
rect translation of the money. Creditworthiness can be tracked by transactions on the
blockchain, providing an immutable and transparent account of the person’s financial his-
tory. It reduces a lot of the third-party verification needed to approve a loan, thus cutting
costs down significantly.
Another main challenge is the lack of information to make a credit decision. The
bank’s process of obtaining information about a person or company’s financial history
J. Open Innov. Technol. Mark. Complex. 2022, 8, 185 26 of 44

and security to approve or reject the loan is lengthy. Due to the time required to conduct
the investigation, many loans take a long time to process.
The information, though through a third party, is not always accurate. Depending on
the accuracy, this can pose a risk for both the lender and the borrower. Therefore, there
needs to be a transparent way to carry out checks. Blockchain can not only keep a ledger
that ensures that financial transactions and trustworthiness can be seen by multiple par-
ties but can also allow this data to be accessed in real-time. Therefore, no large hunt is
needed to investigate whether or not the person or company is qualified for the loan. The
information lies within the immutable ledger that is fully accessible.
Another component that blockchain allows for is reliance on cryptocurrency as an
investment. Now, cryptocurrency can be an asset that is used to back certain loans. One
of the largest pain points of loans is the time taken to approve the loan once requested.
This is due to the immense amount of third parties that need to either provide information
for the approval process or look over the loan application themselves. When evaluating
collaterals, many people have to become involved in assessing the worth of the collateral
to ensure that it can indeed cover the cost of the loan.
Furthermore, humans are involved heavily in the process. Therefore, time delays oc-
cur due to humans’ limited capacity when processing documents. Blockchain architecture
enables the possibility of speeding up the process by the utilization of smart contracts and
by verifying information via the immutable ledger. Smart contracts allow for agreements
to be executed automatically and efficiently, thus reducing the time it takes from one ap-
proval action to another.
Furthermore, it reduces costs as legal and administrative fees can be cut. The immu-
table ledger allows documents and information to be shared via the ledger, thus eliminat-
ing the need for an investigation, as it can be inquired of the ledger. All the information is
available and easily accessed by those processing the loans. When loans are backed by
cryptocurrency, the currency exists on the blockchain. Thus, it is evident that the applicant
has collateral funds, reducing any time needed to understand and investigate whether or
not the collateral can support the loan.

6.1. Colendi
Colendi is a credit-scoring FinTech company that leverages new sources of infor-
mation about borrowers to provide new avenues of creditworthiness [108].
Colendi leverages the Ethereum blockchain and machine learning-based scoring
technologies to evaluate user data segments; that is, the process of collecting data related
to the transactions, smartphones, social media data, and more than a thousand pieces of
personal information to generate a metric called Colendi Score.
This allows underserved and underbanked populations to have the ability to assess
the population with less traditional information. Banks create scores dependent on their
customers’ records, so the potential borrower is not evaluated based on their characteris-
tics. The customers’ private data shows much more information than the bank can access.
Thus Colendi’s goal is to utilize the transparent property of blockchain to create a high
standard of evaluation transparency combined with their machine learning algorithms to
allow for a comprehensive understanding of the borrower’s full potential.
The blockchain component of the Colendi platform has three main functions: identity
management, collecting/storing data, and generating a credit score that can lead to a lend-
ing decision based on the stored data.
Due to its significant nature, the data storage combines blockchain and decentralized
storage, Storj. The Colendi SDK allows users to interact with Storj without knowing the
underlying technology.
The computation of scores is not done on the blockchain itself but rather by the
Engima protocol, where data can be split across nodes and used for computation. The
score is then relayed back and stored on the blockchain.
J. Open Innov. Technol. Mark. Complex. 2022, 8, 185 27 of 44

Colendi is opening up the opportunity for underbanked populations to gain access

to micro-financed loans. If a user does not have enough data to secure a loan, Colendi
offers the option for a borrower to stake Colendi tokens.
Though these tokens cannot be used as collateral against a loan, they provide a pos-
itive number when it comes to scoring. Furthermore, the data drawn upon goes beyond
just traditional assets and bank history by including mobile data, social media data, and
external data partners. All information is then stored in decentralized storage and drawn
into the Engima protocol to create a score [109].
All of these processes on the blockchain significantly reduce costs as everything takes
place within the Colendi network and does not have to go through several intermediaries.
Furthermore, this reduces time delays as these activities are triggered via smart con-
tracts and are all within the Colendi network. Thus, no time delay is associated with pro-
cessing information by third-party companies verifying the data. Furthermore, this data
is secured as only the Colendi network can access the decentralized storage system.
All that lenders garner is the final score the Colendi protocol produces. The block-
chain provides an integral abstracting layer that ensures the protection and confidentiality
of the borrowers’ data and information.

6.2. Figure
Figure is a FinTech company leveraging blockchain technology to speed up the loan
application process. Figure has its own blockchain platform called Provenance. Prove-
nance is used to store data within the blockchain to ensure that the data is accessible and
untampered with.
The data is digitally signed and validated using smart contracts. This inherently re-
duces the need for third-party companies to verify the data, saving time and cost through-
out the loan process. The transactions are granted by the administrator and need to be
approved by the stakeholders.
The administrator is a key player in the blockchain as they create and review smart
contracts held by the node to process transactions. They are also in charge of determining
the cost of the transaction and the amount of stake that each node needs to hold. When a
loan originator selects an offer from a consumer’s application for a loan, they generate a
”smart contract” that enables them to provide the amount required in the loan.
Once the loan is funded, the originator can either retain or sell the servicing, meaning
that the originator has sold the rights to service the loan (i.e., collect the monthly principal
and interest payments). The loan payments are collected through a remittance agent.
The administrator creates smart contracts related to the transactions by taking en-
crypted data from the member and transforming that information into encrypted data in
the blockchain [110].
Banks on the Omnibus network, called Omnibus banks, are responsible for facilitat-
ing fiat settlement on the blockchain.
When fiat is used, the members check to ensure that the Omnibus bank account has
enough money. The bank then generates a settlement token backed by the member’s ac-
count. Then, the token is passed to the receiving member. This transaction is immutable
and present on the blockchain such that it can be referenced later if needed. By performing
all of the transactions on the blockchain, Figure cuts out all other intermediary fees, leav-
ing only the origination fee as the primary fee on the blockchain. However, one caveat to
using Figure for loans is that they default to traditional methods to determine creditwor-
thiness, primarily a high credit score [111]. This does not open up Figure to those with no
banking infrastructure or to those who do not have a good credit history.
However, since the data is stored on the ledger, the approval time for the application
is much faster as the records within the ledger are trusted. Furthermore, smart contracts
enable many functions within the entire loan process to be automated and reduce any
overhead of maintenance by a person.
J. Open Innov. Technol. Mark. Complex. 2022, 8, 185 28 of 44

6.3. Celsius
Celsius is a FinTech lending platform that leverages blockchain technology to allow
people to use cryptocurrencies as collateral for fiat loans. Many people are investing their
money into digital assets due to cryptocurrency hype.
They hold onto their digital assets as they invest in cryptocurrency with a long-term
mindset. Simply put, they are investing now for significant payoffs in the future.
However, although some businesses and companies allow the use of cryptocurren-
cies in transactions, crypto assets still do not have a lot of “real value.” The only way to
obtain value from them is to sell them—in which case, with such volatile prices, an inves-
tor does not know if the sale will be for profit or for a loss.
This is extremely important, as when people need cash instantly, they cannot always
wait for the market to regulate such that their coins are valued higher. This often leads
people to have to leverage real-world assets to obtain a loan from the bank.
Celsius now offers a platform where people can leverage their cryptocurrency as col-
lateral to secure a loan in fiat currency. Rather than selling the cryptocurrency, members
can leverage it while still holding onto that crypto portfolio to obtain future value [112].
They even take it one step further and allow members to accrue interest on their crypto
assets, similar to how money in a bank accrues interest. When asset holders deposit coins
on the Celsius Network, they can earn interest on their coin balances.
Celsius token (CEL) is the heart of the blockchain implementation of Celsius. These
CEL tokens are Ethereum ERC-20 coins issued on the Ethereum network. Celsius uses
these tokens so that the lending and borrowing model is transparent.
The Ethereum platform is leveraged by Celsius such that it can utilize the idea of
smart contracts, leverage quick transaction times, and leave a traceable footprint that al-
lows for trade transparency on coin exchanges.
Lenders in the Celsius network can be anyone who deposits crypto assets into the
Celsius wallet. These assets are stored in a “Lending Stake Pool” Celsius account. These
accounts then transfer the coins to coin exchanges. The lender’s wallet then accrues inter-
est in the form of Celsius tokens.
Lenders also can leverage their crypto assets in exchange for a fiat-based loan. In this
instance, the user requests a loan and, in exchange, transfers crypto assets, which are
locked. These crypto assets cannot be withdrawn until the loan is paid. The user then re-
ceives the fiat loan via a debit card or a direct bank transfer to a Celsius bank account. The
payment plan and instructions are also issued at this time. Then, the user pays the loan
installments like any other traditional loan. Once a loan is paid, the crypto assets are un-
locked, and users may withdraw them as they please. However, if the user fails to pay,
Celsius has the authority to sell the crypto assets in exchanges to recover the fiat value
and reduce the loan amount. To borrow coins, a borrower deposits a fiat value into a cus-
todian trader account owned by Celsius. To short the crypto asset, the borrower places a
limit sell order. This sell order acts as a request that includes conditions of the trade (time
and price) and a fee to access the assets.
While the borrower is requesting, the Celsius service checks to ensure the funds that
are being requested are available based on the assets from lenders.
If the trade is approved by Celsius, then Celsius issues a sell order of the crypto asset
on the exchanges to hold a short position on behalf of the borrower.
Once the crypto assets are sold, Celsius orders exchanges to purchase the crypto as-
sets back. When the Celsius platform and the borrower make a profit off a short, the Cel-
sius master account receives a percentage of that profit in addition to the fees accrued
from holding the short position. The money received by the master account from the bor-
rowers is in fiat. Still, the Celsius platform converts this fiat value into CEL tokens and
then distributes it back to the lenders’ wallets as a form of daily interest. The amount that
is distributed back is contingent on a Proof of Stake consensus.
In other words, the more crypto assets the lender puts into the Celsius Network, the
more interest in the form of CEL tokens they accrue.
J. Open Innov. Technol. Mark. Complex. 2022, 8, 185 29 of 44

Lenders then can buy and sell these CEL tokens on exchanges however they wish.
Additionally, lenders can pay off their Celsius loans via CEL tokens.
By using the CEL token, not only is Celsius offering a very transparent and efficient
method of making exchanges, but it also provides an excellent incentive for people to lend
out their crypto assets and use them as collateral for fiat currency while still holding onto
them such that they can realize their long-term investments.
The Celsius network leveraging blockchain eliminates any third-party cost as the
loans are lent and borrowed within the Celsius platform, effectively making it a P2P loan.
This cuts out any loan application or approval process that requires anybody other
than the borrower or lender, making the entire process faster.
It also significantly reduces transaction and administrative costs. The loan is also not
based on credit, but it is contingent upon the amount of stake (i.e., the amount of crypto
coin) held and put up as collateral.
However, these crypto assets, when used as collateral, are also subject to volatility.
Therefore, if the crypto asset loses its value, the Celsius network will require more assets
to be put up as collateral.
Furthermore, the transactions all take place on Ethereum, and the ability to use smart
contracts enables all internal functions, such as checking the availability of funding or
efficiently performing the transactions, significantly reducing the overhead that comes
with administrative work for traditional loans.
Summary: Lending processes can be significantly more efficient when using block-
chain, especially when the network leverages smart contracts to perform much of the func-
tionality. The immutable ledger provides an accurate record that can later be referenced
(or, in some cases, used) to ensure the validity and honesty of an entity and even be a
marker of how responsible they are. All three companies, Colendi, Figure, and Celsius,
utilize blockchain differently within the loan process. However, they address the pain
points they all face and have leveraged the architecture to benefit their users.
Tables 11 and 12 compare and summarize the solutions provided by Colendi, Figure,
and Celsius.

Table 11. Deposit and Lending Chart.

Categories Credit Assessment Credit-Based Loan Crypto-Based Loan

Problems Faced
by Individuals Colendi Problems Facing Figure Problems Celsius Problems Facing
and Small Busi- Solutions Colendi Solutions Facing Figure Solutions Celsius
nesses
High Fixed Costs It uses blockchain - Figure only has - Celsius does not Centralized net-
(Administration to track and keep an origination fee charge any fees, work as the wal-
Fees and Transac- records of peo- as all the other in- and the loans are let is held and
tion Fees) ple’s trustworthi- termediary fees lent and bor- managed within
ness. There are are cut out due to rowed within the Celsius’s plat-
fewer third par- the loans being Celsius platform, form.
ties to go sold and obtained making it a P2P
through, so costs via the Prove- loan.
are reduced. nance blockchain.
Lack of Infor- It uses a decen- Due to the goal of - A high credit The loan is not -
mation to Make tralized scoring serving the un- score is needed. based on credit
Credit Decisions system that con- derbanked popu- This is the only but on the amount
sists of the lation, more peo- aspect Figure of crypto coins
smartphone, so- ple may get loans checks. put up as collat-
cial media data, that they cannot eral.
and transaction pay off—which
logs showing re- could hurt finan-
payment perfor- cial institutions.
mance.
J. Open Innov. Technol. Mark. Complex. 2022, 8, 185 30 of 44

Table 12. Deposit and Lending Chart.

Categories Credit Assessment Credit-Based Loan Crypto-Based Loan

Problems Faced
by Individuals Colendi Problems Fac- Figure Problems Fac- Celsius Problems Fac-
and Small Busi- Solutions ing Colendi Solutions ing Figure Solutions ing Celsius
nesses
Lack of Collat- Allows borrow- - - - Celsius allows Due to crypto
eral ers without crypto assets to asset volatility,
much collateral be used as col- Celsius requests
to stake Colendi lateral when try- more crypto as-
tokens contrib- ing to obtain a sets as collateral
uting to a posi- fiat loan. for loans if the
tive score. assets’ value
drops below a
certain thresh-
old.
Poor or Insuffi- In underbanked - - Figure still does The loan is not -
cient Credit populations, a soft credit pull based on credit
other data is and requires a but on the
drawn upon (see decent line of amount of
text) to deter- credit to obtain acrypto coins put
mine creditwor- loan. up as collateral.
thiness.
Time of Appli- Colendi Token - The immutable - Celsius uses a -
cation Process to enables efficient ledger allows simple check via
Approval/Rejec- and automatic administrators smart contracts
tion. fulfillment of to trust the rec- on Ethereum,
agreements that ords held within which is time-ef-
reduce cost and the ledger, sav- ficient
time delays. ing time during
the process. The
hash token ena-
bles smart con-
tracts to auto-
mate many
functions during
the loan process.

7. The Investment Sector

The investment sector uses a different approach when implementing blockchain-based
solutions. Although blockchain can solve problems due to the traditional operating proce-
dures of investing, the current focus is on investing in blockchain rather than using blockchain.
Institutional and retail investors are investing in digital assets to obtain long-term profits.
Bitcoin and Ether are two of many digital assets on blockchain frameworks. Although
Bitcoin and Ethereum entered a bear market as of the second quarter of 2022, there is still
momentum for a long-term investment.
Investors are treating digital assets as an entity that holds value, not only as a technology
that simplifies the ease of transaction as the other sectors do.
This section overviews five FinTech companies in the FinTech investment sector, Gray-
scale, Fidelity Digital Assets, Robinhood, Webull, and IBKR, and discusses the three main seg-
ments of this sector [26]: institutional investment, venture capital, and retail investing.
J. Open Innov. Technol. Mark. Complex. 2022, 8, 185 31 of 44

7.1. Institutional Investment

Before developments in regulatory requirements surrounding Bitcoin, trading and
investing in digital assets by institutional investors were not as important as the other
stocks and securities being traded.
This is due to the opaque rules and regulations. However, as Bitcoin became wide-
spread, the use of digital assets in payments rose. Governments worldwide began to for-
mulate rules and regulations around Bitcoin, making it fill a once gray area.
Bitcoin and digital assets appeared to hold their power for years, inspiring the buy-
in of institutional investors due to their ability to hedge against inflation, economic de-
pression, and the aging population. In other words, as fiat money was losing its value,
Bitcoin could hold its value and be a safe investment for the period before 2020.
However, this anti-inflation concept was proven incorrect as of 2022. Countries such
as Canada and Europe have Exchange-Traded Products (ETPs) that allow institutional
investors to place money on stock exchanges backed by crypto assets. ETPs are an excel-
lent way for investors to get involved with crypto without the need to handle the actual
management of the assets themselves.
According to Fiona, many different institutional investors entered the market to cap-
italize on crypto opportunities. This was started by giant investment management firms
noticing a growing interest in crypto. Many companies including Binance [113], FTX [114],
Coinbase [115], and Grayscale Investments [67] emerged in the institutional investment
sector. Merrill Lynch [116], Goldman Sachs [117], and Fidelity Digital Assets also joined
[118]. This subsection provides an overview of Grayscale and Fidelity Digital Assets.

7.1.1. Grayscale Investments

Grayscale [67] is a digital currency asset manager offering various investment prod-
ucts. These investment products retain the value of their shares that reflect the actual per-
formance of the digital assets that compose the product.
These products can either be single asset products or diversified asset products. In
this scenario, Grayscale is not using blockchain to carry out the investment procedures.
Still, it is using the cryptocurrency’s value store to realize a profit for its investors. These
products enable investors to gain exposure to digital currency asset classes without wor-
rying about buying, storing, or safekeeping digital currencies.
The products are held in cold, offline storage with the Coinbase Custody Trust Com-
pany, which ensures the security of the assets. Furthermore, investors save money by in-
vesting in products rather than holding the assets by eliminating the expensive and time-
consuming processes required to trade, acquire, secure, and keep the assets.
Grayscale enables the investor to bypass having to deal with different intermediaries
when doing the trading as they handle those tasks themselves. Once again, it is worth
noting that Grayscale is holding crypto assets to realize their value on the stock market
rather than for the properties of the crypto assets due to being built on a blockchain. The
assets are held in a cold storage wallet and not on any blockchain.

7.1.2. Fidelity Digital Assets

Fidelity Digital Assets [118] focuses on custody solutions for institutional investors
who want to bypass the hassle of securing these assets. Therefore, the company found its
market in offering trading and custody services that enable its investors to realize the true
potential of their blockchain holdings without doing the trading themselves.
The assets are stored in cold storage. Thus, they are physically separated from the
internet, making them highly secure. Furthermore, the trade execution services will lev-
erage the same internal crossing engine, that is, when buy and sell orders are paired in-
ternally from two separate customers of the same stock at the same price. Like Grayscale,
Fidelity Digital Assets does not harness the utility of blockchain as an entity but empha-
sizes the value of cryptocurrency to make a profit.
J. Open Innov. Technol. Mark. Complex. 2022, 8, 185 32 of 44

7.2. Venture Capital

Venture capitalists are utilizing crypto assets (i.e., cryptocurrencies, utility coins, and
security tokens) to diversify their portfolios and create crypto-based funds that are used
in investing in blockchain start-ups, initial coin offerings (ICO), and crypto assets. Venture
capitalists funded start-up blockchain companies by issuing a certain number of tokens to
be sold to the venture capital (VC) that has invested in them [119].
This type of investment is captivating because it gives VCs an early jump on stake
within the company and because cryptocurrencies are liquid and can be seen as a tool to
counter the effects of inflation. Crypto asset management products and services are be-
coming more accessible to the public. When investing in a typical company, VCs put in
fiat money to obtain a long-term profit.
With cryptocurrencies, the profits need only be transferred into Bitcoin or Ether.
Then, online services can convert that into fiat currency. Therefore, investors can realize
gains and obtain them more easily using ICOs.
There are now several cryptocurrency venture capital firms, such as SPiCE [120], Pan-
tera [121], and Blockchain Capital [122]. Each firm has a unique way of building portfolios
and offering its investors various incentives, emphasizing that crypto assets are liquid
assets that allow investors to realize their money sooner.

7.3. Retail Investing

Retail investing can be done by an individual who buys and sells securities, equity
shares, commodity contracts, mutual funds, or exchange-traded funds (ETFs) through
brokerage firms or retirement accounts (e.g., 401k accounts) or can be an institutional in-
vestor who invests the money of others on their behalf. Crypto markets entered a new era
in 2017 due to the adoption of cryptocurrencies by retail investors [123].
However, they pulled out of markets after making profits and witnessing the volatil-
ity of Bitcoin—hoping to avoid losing the investment that they had made due to the high
volatility. Because of the many exchanges now handling crypto trading, increased regu-
lation, and price stabilization due to institutional investors providing liquidity to the mar-
ket, retail investors have once again entered the crypto market.
There is speculation over whether or not this will be similar to 2017, where assets are
held for the short term, or whether it will be similar to institutional investors making a
long-term investment into crypto assets.
Brokerage platforms have been set up specifically for the crypto space to ease the
transition of new investors into the market. Schwab [124], ETrade [125], Robinhood [126],
Webull [127], Interactive Brokers (IBKR) [128], and Merrill Edge [129] are popular broker-
age platforms. This section discusses Robinhood, Webull, and IBKR, which are used to
exchange crypto.

7.3.1. Robinhood
Robinhood [126] has recently surged to become one of the most popular brokerage
platforms in the United States, allowing trading stocks and ETFs in the crypto space. It
has no fees associated with asset trading.
The main difference between putting fiat money into Crypto stocks instead of pur-
chasing Crypto directly (say through a company such as CoinBase) is that the cryptocur-
rency bought in Robinhood cannot be taken out or converted into something else. Instead,
to realize the value of the money, the crypto assets need to be converted back into fiat
money. It is great for newcomers who are not entirely sure what cryptocurrency is to in-
vest their money in a simple-to-use app that allows them to participate in cryptocur-
rency’s rise and fall. It is not for large traders who want to make large volume trades or
to expand their trading portfolio.
J. Open Innov. Technol. Mark. Complex. 2022, 8, 185 33 of 44

7.3.2. Webull
Webull’s [127] marketing strategy depends upon providing research on and analysis
of the market. Webull is a subsidiary of Fumi Technology, a multinational Chinese com-
pany.
Therefore, though it has similar trading capabilities as Robinhood—it seems better
suited for more sophisticated investors as it has more in-depth analysis and metrics than
Robinhood. Like Robinhood, once fiat money is converted into crypto assets, the only way
to realize that value is to convert it back into fiat money. Webull’s platform is for trading
and exchanges, not for storing crypto assets.

7.3.3. Interactive Brokers

Interactive Brokers (IBKR) [128] is an American multinational brokerage firm. IBKR
provides broad global market access. In September of 2021, IBKR added cryptocurrency
trading to its offerings by allowing users to directly trade cryptocurrencies, including
Bitcoin, Ethereum, Litecoin, Bitcoin Cash, and cryptocurrency exchange-traded funds
(ETF).
Most retail investing companies are inevitably shifting towards utilizing blockchain
technologies in their financial services.
Summary: For institutional and retail investing, crypto assets are held for their mar-
ginal value on the stock market. The assets are not used for their blockchain capabilities
but for their value as a good investment. Crypto assets are used to hedge bets against
inflation, diversify portfolios, and provide an easy way for those interested in crypto to
become somewhat involved.

7.4. Non-Fungible Token

Non-fungible tokens (NFTs) are digital assets stored on a blockchain. They are typi-
cally correlated to the ownership of digital content (i.e., digital arts) such as photos, audio,
videos, and in-game assets. Such ownership can be transferred through blockchain trans-
actions, which means that NFTs can be sold and traded like cryptocurrencies. However,
unlike cryptocurrencies, NFTs are uniquely identifiable (i.e., non-fungible). For example,
a Bitcoin is identical (fungible) to another Bitcoin, but an NFT differs from another NFT.
NFT is believed to be a realistic solution for ownership proof for digital assets, even
though its legitimation is still uncertain [130]. NFT ownership is not equivalent to legal
rights such as copyright and intellectual property. One can still share or copy a digital file
freely that is associated with an NFT. It is currently just a decentralized proof commonly
recognized in the blockchain community and is granted value by trading with cryptocur-
rencies. OpenSea [131] is currently the largest marketplace for NFTs, where one can create,
trade, and bid for NFTs via different kinds of cryptocurrencies.
The first NFT project, Etheria [132] (built on Ethereum), was launched in 2015. It con-
sists of a total number of 33 × 33 tiles (a digital map based on tiles), among which 457 tiles
are land and can be bought for ownership. While each tile was initially hardcoded to 1
ETH, some were bid to about 70 ETH when NFT started rapidly growing in 2020 [133].
The trading market of NFTs was more than $17 billion in 2021, about 210 times as
much as in 2020, which was $82 million [134]. Recently, placing in-game items (e.g., ava-
tars, virtual costumes, and properties) as NFTs on blockchain became a new trend and
derived a set of Fintech applications called GameFi (i.e., game and decentralized finance)
[135]. Online game players can earn in-game rewards (e.g., digital points, game items, and
NFTs) by completing tasks in-game or competing with other players. Traditionally, in-
game items have been traded via the digital points created by gaming companies, which
are charged via fiat money. Items are centralized and owned by gaming companies. Even
though there are third parties to trade in-game items in the real world, the commission
fees and verification processes cost money and time.
J. Open Innov. Technol. Mark. Complex. 2022, 8, 185 34 of 44

Producing them as NFTs on blockchains makes them decentralized and owned by

the players. They can be traded or sold through blockchains by their owners. Such use
cases can also be seen in the metaverse, an emerging virtual reality technology trend
named by Meta [136]. It creates a virtual world that combines physical and virtual socie-
ties, in which users create digital forms of art and property. NFTs can enable the owner-
ship of such digital assets. The top GameFi projects based on their market capitalization
can be found in [137]. NFTs are an important aspect of Web3.0, a popular idea for decen-
tralization being discussed in the blockchain community. Web3.0 is envisioned as the new
iteration of the World Wide Web (WWW), with Web1.0 characterized by static web pages
(e.g., official websites) and Web2.0 featured by web-based platforms centering on user-
created content (e.g., social media). Web3.0 incorporates decentralization and cryptocur-
rency, envisioning a decentralized internet with high-level data integrity (immutable data
source) and user privacy (pseudonymity).
Like most blockchain-based infrastructure solutions, it emphasizes peer-to-peer user
networks and tends to eliminate the need for trusted intermediaries. Some believe that
Web3.0 is more secure, scalable, and pseudonymous, but some still are concerned about
the harmful content that may inundate a decentralized web without censorship. Further-
more, pseudo-decentralization could mean a centralization or dictatorship of wealth and
resources to a small group of rich and powerful people [138]. NFTs can be seen as a solu-
tion for digital asset ownership and a use case of Web3.0. They can be used to identify and
claim ownership of all the digital data on the Internet, paving the way toward an ultimate
decentralized data storage.
Note that NFTs only store the unique identification and the ownership of a digital
asset on a blockchain, not the whole digital file. Whether Web3.0 will become a reality is
yet to be known. Technical problems still need to be solved, such as the performance bot-
tleneck of blockchain technologies, the blockchain storage explosion, and the lack of au-
thoritative regulation. However, a new perspective for a peek into the future is always
noteworthy and intriguing.

8. Results and Discussion

This section presents the challenges, results, and discussion for Fintech from the per-
spective of blockchain-based DeFi. We start with the challenges, conclude and compare
each covered topic and implementation, and then give a general analysis and discussion
on DeFi.

8.1. Challenges
Implementing blockchain technology for the financial sector brings many changes to
business models, financial services, and operating processes. This section provides an
overview of privacy and security issues, energy efficiency and sustainability issues, mar-
ket volatility, and regulations issues.
Although blockchain and cryptocurrencies are widely discussed, they are much less
understood. The lack of expertise and reputational risk are two of the many challenges
facing banks when incorporating blockchain into their financial services.
Utilizing blockchain for FinTech poses security risks. The decentralized nature of
blockchain necessarily allows any actor to write unaudited and even malicious smart con-
tracts [138], where user funds can be lost through programming errors or stolen.
Most FinTech applications utilize permissioned blockchains that are subject to peri-
odical audit by the governments to detect/prevent illegal activities (i.e., money launder-
ing, blackmailing, and ransomware). Therefore, some governments require cryptocur-
rency exchanges and investing platforms to collect customers’ personal information, i.e.,
know your customer (KYC) procedures [139], and comply with regulatory requirements.
This poses a lengthy process of ID card verification, face/biometric verification, and
document verification (i.e., utility bills) as proof of address. Moreover, FinTech companies
must ensure that their permissioned blockchain network has sufficient redundancy to
J. Open Innov. Technol. Mark. Complex. 2022, 8, 185 35 of 44

prevent network fragmentation. With transparency being one of the primary purposes of
blockchains, privacy is a critical concern. Implementing blockchain for the FinTech sector
is subject to data protection regulations, such as the General Data Protection Regulation
(GDPR) [139], the Personal Information Protection and Electronic Documents Act
(PIPEDA) [140], and the California Consumer Privacy Act (CCPA) [141].
These data protection laws and regulations hinder the adoption of blockchain for
FinTech. For example, the immutability of recorded transactions violates GDPR’s “right
to be forgotten,” where users have a personal right to withdraw and delete transactions
and personal information. This includes any encrypted data [139].
Utilizing off-chain storage of personal data is a feature that could be useful for data
privacy compliance. Data can be stored and maintained off the blockchain with only a
hash of the personal data recorded on the ledger. However, this approach reduces the
transparency benefit of blockchain.
Blockchain technology has inherent security properties by design. It is based on prin-
ciples of cryptography, decentralization, and distributed ledger. Yet the implementation
of blockchain still faces security issues.
As of today, most blockchains employ public-key cryptography for identification.
Ideally, the private key should be only known to the user. However, many cryptocurrency
exchanges store the users’ private keys in online “hot wallets.” There have been cases
where hackers have stolen users’ private keys in online wallets. As a result, lots of funds
and digital assets were stolen. We have seen an attack on AscendEX hot wallet where the
AscendEX crypto exchange lost $77.7 million [142].
The authors in [85] categorized the security risks and challenges mainly in smart con-
tract vulnerabilities, infrastructural risk, and interdependence weaknesses. DApp devel-
opers must be wary when designing applications and choosing the infrastructure to which
they deploy their applications. Choosing the infrastructure directly affects the peer-to-
peer network throughput, which may lead to network congestion and cause honest trans-
action timeouts [85]. Implementing a new protocol on top of an old protocol may lead to
complexities and interdependence weaknesses since the security of the new protocol is as
good as the security of the old protocol.
Smart contracts still prove their value for FinTech applications by making financial
processes and transactions cost- and time-efficient. However, implementing smart con-
tracts for FinTech applications requires a precaution to eliminate the presence of vulnera-
bilities and avoid the misuse of intelligent contracts.
This includes conducting security code scanning and testing. Ethereum’s Decentral-
ized Autonomous Organization (DAO) attack is an example of a misconstructed smart
contract. DAO suffered from vulnerabilities in its code base that allowed an attacker to
retrieve approximately 3.6 million Ether from the DAO fund [143]. As of the second quar-
ter of 2022, the market has entered a crypto winter [144].
The prices of all cryptocurrencies have entered the bear market and have been af-
fected by a general market downturn. FinTech companies have shifted their focus to
building for the long-term as the average bear market typically bottoms out around the
12-month mark and may fully rebound in two years.
Permissionless blockchains’ energy efficiency and sustainability is a challenging
problem that has a significant environmental effect and could prevent the widespread
adoption of this technology. However, PoS and PoT were proposed as alternative solu-
tions to the PoW consensus algorithm. Recent research works focus on PoW-based solu-
tions. The authors in [145] propose an offline optimization solution to reduce energy con-
sumption. Others have proposed Green-PoW [146] by utilizing the energy spent during
block mining to elect a small number of miners that will exclusively mine the next block.
J. Open Innov. Technol. Mark. Complex. 2022, 8, 185 36 of 44

8.2. Comparative Results on the Reviewed Topics

Based on the review and investigation of the Fintech literature, we examined block-
chain-based DeFi by establishing a SWOT analysis to identify the strengths, weaknesses,
opportunities, and threats in this field.
This article reviews and categorizes DeFi applications into three sectors: (1) Pay-
ments, (2) Deposits and Lending, and (3) Investment Management. We give comprehen-
sive overviews for each segment of service types and application examples. The payment
sector facilitates user payment activities such as retail, point of sale, and money transfer
in a decentralized manner. Deposits and lending enable loans and user credit manage-
ment with fewer intermediary procedures. Investment management introduces crypto-
currency exchanges and their derivatives (e.g., NFT). Table 13 compares the three sectors
to provide an overview of the reviewed topics.

Table 13. Overall comparison of the three sectors.

Example
Sectors Advantages Disadvantages
Technologies
1. Avoid a significant amount of transac- Retail and Consumer
tion fees, such as credit card fees. 1. Lower transaction rates (transactions per Payments: RippleNet,
2. Less or no intermediaries and thus less second) compared to CeFi clouds. Stellar Network.
delay. 2. User-unfriendly: current blockchain- Point of Sale Payments:
3. Less risk and fraud due to less or no in- based financial payments are intricate to Algorand Blockchain,
termediaries. most users. Pundi-X.
Payments
4. Transparent transactions. 3. Private key storage: user tends to lose
5. Lower transaction error rate. their private keys if storing them offline,
6. Easy to localize the fraudulent transac- but online wallets are risky. Money Transfer:
tions. 4. Hard to scale. SureRemit, Everex.
7. Useful for undeveloped regions that 5. Potential high gas fee per transaction.
lack financial infrastructure.
1. Less intermediary fees due to fewer in-
termediary processes.
2. Less delay due to fewer audit proce- 1. Hard to determine collateral and loan
dures (audit can be reused). value due to unstable cryptocurrency
3. Pseudonymous deposits and lending prices.
preserve privacy. 2. User-unfriendly.
Deposits and Lend- 4. Transparent deposits and lending his- 3. Private key storage problem. Colendi, Figure, Cel-
ing tory. 4. High collateral requirements due to lack sius.
5. An accurate record of lenders. of trust in borrowers.
6. Undeniable loan and collateral (immuta-5. Hard to scale.
ble ledger). 6. Fewer audits and censorships lead to
7. Easy to localize lending and collateral higher risk for lenders.
scams.
8. Fluidify cryptocurrency.
1. Pseudonymous investment.
1. Unstable cryptocurrency prices.
2. Manifest values of digital assets such as
2. User-unfriendly.
cryptocurrency.
3. Potential fraudulent transactions even if
3. Flourish blockchain development.
it is easy to localize. Binance, FTX, Coinbase,
4. More and more companies and organi-
4. Hard to undo the damage (when some Grayscale Investments,
Investment Man- zations are accepting cryptocurrencies.
crypto assets are lost, they are hard to Merrill Lynch, Goldman
agement 5. Easy to localize transaction scams.
recover). Sachs, Fidelity Digital
6. A new financial product that reflects the
5. Private key storage problem. Assets.
market and economy.
6. ICO and crypto scams due to too much
7. NFTs to correlate to ownership of digi-
hype.
tal content.
J. Open Innov. Technol. Mark. Complex. 2022, 8, 185 37 of 44

8.3. General Analysis and Discussion on DeFi

The concepts of DeFi bring us the excitement of a fair, secure, and democratic finance
solution with self-controlled assets and pseudonymous transactions. The invention of
blockchain technology makes it realistic and tangible. While blockchain technology is un-
doubtedly the first option to implement DeFi at present, weaknesses and threats exist in
both the technology and DeFi itself. For example, technically, blockchain transactions are
slow compared to CeFi transactions (not considering the intermediary processes of CeFi).
Even though Ethereum 2.0 promises 100,000 transactions per second [147], it is still not
comparable to the million-grade requests per second of CeFi clouds.
Moreover, blockchains can help realize immutable and transparent data and transac-
tions. However, the immutability of transactions is a double-edged sword. If a historical
transaction or data turns out to be a mistake in the future, there is no direct way to correct
it. Nonetheless, there are approaches to “update” transactions by appending new blocks
with transactions that correct mistakes [148]. Still, it wastes storage space, and we know
that data size is a critical problem of blockchain with the continuously increasing data
chain, c.f., blockchain storage explosion [149].
Centralization is notorious, but it has its advantages, such as auditability, good cen-
sorship, and lower collateral requirements for lending because of the mutual trust be-
tween the centralized party and a regular customer. Trust in the centralized entities such
as banks and governments has been successfully (to some extent) established in current
society. People have been used to the dominating system of such centralization. On the
other hand, financial solutions and regulations are slow to respond. Usually, they will
only be updated after the damage has been done (e.g., huge scams or frauds), so DeFi may
not be able to be widely adopted if CeFi is well-operative. Nonetheless, DeFi, which is
more powerful and beneficial to users, has become an important alternative to CeFi.
Besides all the benefits we mentioned for DeFi, decentralization has general strengths
and opportunities. For example, with decentralization, standardization can be automati-
cally done in a decentralized fashion. For example, what the majority follows and agrees
will automatically become the standard, which more new and young users will follow.
Such mechanisms are mainly used for consensus but can be extended to a blockchain-
based standardization or regulation solution that supplements DeFi. Moreover, with de-
centralization, financial globalization can be better established over borderless financial
activities, which can be achieved without a centralized organization such as SWTIF [150].
A cross-border transaction will no longer need to go through multiple entities before it
goes to the receiver’s account.
Finally, based on the above review and discussion, we implemented a SWOT analysis
and concluded the outcomes in Table 14 (in terms of strength, opportunities, weakness,
and threats). Such situational assessment helps to evaluate the strategic position of DeFi
in the market and the research cycle, both internally (e.g., financial perspective) and ex-
ternally (e.g., environment perspective).

Table 14. SWOT analysis on DeFi.

Positive Negative
Weakness.
Strengths.
1. Slow-responding financial solutions: usu-
1. Immutability and transparency of data and
ally only updated after damage (e.g.,
transactions.
huge scams or frauds), so DeFi may not
2. No central parties dominate the services.
Internal be widely adopted if CeFi is well-opera-
3. Benefits of CeFi can also be applied to DeFi,
(Attributes of DeFi) tive.
e.g., accessible and inclusive online services.
2. DeFi solutions are pseudonymous (not
4. Custody of self-assets.
anonymous).
5. Smart contracts execute strict agreements
3. High collateral requirements, e.g., lending
automatically.
in DeFi.
J. Open Innov. Technol. Mark. Complex. 2022, 8, 185 38 of 44

6. User-privacy preserving, e.g., applying de- 4. Key protection issue: user needs to secure
centralized identity to DeFi. their private key, but wallet providers are
somewhat centralized.
Opportunities. Threats.
1. Automatic standardization: standardization 1. Technical challenges in blockchains, for
can be automatically done in a decentralized example, slow transactions and contro-
fashion (e.g., what the majority follows be- versial consensus.
comes the standard). 2. Expensive implementations and develop-
External 2. Globalization: borderless financial activities ment of decentralized platforms.
(Attributes of the environ- can be achieved without a centralized or- 3. Rigid and slow-responding financial regu-
ment, e.g., blockchains, ganization such as SWIFT. lations.
regulations) 3. Fast transactions in terms of fewer interme- 4. Immaturity, e.g., large-scale DeFi plat-
diary processes such as audition and verifi- forms, may suffer serious glitches.
cation. 5. Gas fee in blockchain transactions, even
4. Rich technical recourses, e.g., many open- though there are fewer commission fees,
source blockchain frameworks. blockchain processes usually require a
5. Pseudonymous to genuinely anonymous. gas fee per transaction.

9. Conclusions and Future Work

This survey provides a comprehensive overview of the three main segments of the
FinTech sector: the payments segment, the deposits and lending segment, and the invest-
ment management segment.
To help and benefit future researchers, practitioners, and DApp developers to under-
stand blockchain benefits and applications for FinTech, we provide a summary and a re-
lated discussion on the most popular blockchain applications and use cases for FinTech.
In particular, we first laid out the foundation and architecture of blockchains, smart con-
tracts, digital wallets, and consensus algorithms. Then, we introduced FinTech’s back-
ground and how it came to the current fourth generation. Later, we identified the issues
in each Fintech segment and mapped the blockchain-based applications with the issue
within the allocated FinTech segment. Furthermore, we listed challenges and problems
hindering blockchain development and implementation in FinTech.
In addition to reviewing the current stage of FinTech (from a DeFi perspective) and
envisioning a blockchain-based DeFi future where centralized parties are utterly re-
moved, we highlighted the current limitations of blockchain technology and pointed out
how they could be solved in the future. Besides DeFi maintaining the self-custody user
assets, we consider decentralized identity management valuable to the Fintech sector,
where self-sovereign identities are achieved and have the potential to move blockchain
from pseudonymous decentralization to true anonymity. As we know, cryptocurrency
transactions are pseudonymous and are potentially vulnerable to mapping the public ad-
dress of an account to the user’s real identity by tracking blockchain activities.
Indeed, blockchain-based identity management can avoid such vulnerability and preserve
user privacy by authentication that only reveals a minimal amount of the user’s personal
information. The combination of decentralized identity and DeFi is out of the scope of this
article and remains as future work.

Author Contributions: Conceptualization, T.R. and H.A. Validation, Z.Y. Writing—original draft
preparation, H.A. and T.R. Writing—review and editing, H.A. and Z.Y. Supervision, R.J. and R.D.P.
Funding acquisition, R.J. and R.D.P. All authors have read and agreed to the published version of
the manuscript.
Funding: This research was funded by awards NPRP11S-0109-180242 from the QNRF-Qatar Na-
tional Research, a member of The Qatar Foundation. The findings reported herein are solely the
responsibility of the authors.
Institutional Review Board Statement: Not applicable.
J. Open Innov. Technol. Mark. Complex. 2022, 8, 185 39 of 44

Informed Consent Statement: Not applicable.

Data Availability Statement: Not applicable.
Conflicts of Interest: The authors declare no conflicts of interest. The funders had no role in the
design of the study, in the collection, analyses, or interpretation of data, in the writing of the manu-
script, or in the decision to publish the results.

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