=On the Fragility of DeFi Lending=
We develop a dynamic model of decentralized finance (DeFi) lending that incorporates two/these key features:
1) borrowing and lending are decentralized, anonymous, overcollateralized and backed by the market value of crypto assets where contract terms are pre-specified and rigid; and
2) information friction exists between borrowers and lenders.
We identify a price-liquidity feedback: the market outcome in any given period depends on agents’ expectations about lending activities in future periods, with higher price expectations leading to more lending and higher prices in that period.
Given the rigidity inherent to smart contracts, this feedback leads to multiple self-fulfilling equilibria where DeFi lending and asset prices move with market sentiment.
We show that flexible updates of smart contracts can restore equilibrium uniqueness.
This finding highlights the difficulty of achieving stability and efficiency in a decentralized environment without a liquidity backstop.
'정책칼럼' 카테고리의 다른 글
| 미-일-네델란드 반도체장비 수출 통제 협약에 관한 소고(23-3-1).Gregory C. Allen外. CSIS연구소 (0) | 2023.03.08 |
|---|---|
| USMCA 프로젝트-확고하고 지속가능하며 공정한 북미 제조 공급망 구축-(23.3月)/브루킹스연구소 (0) | 2023.03.08 |
| 기후변화와 환경관련 자연재해후의 금융부문의 리스크(23-2-28)/Owen Nie外.세계은행 (0) | 2023.03.08 |
| 온실가스배출과 은행대출(23-3-3) Koji Takahashi 外.BIS (0) | 2023.03.08 |
| 국내 비은행 부동산PF 금융 익스포져 리스크 관리 방안(23-3-4)/신용상.KIF (0) | 2023.03.04 |