EconPapers    
Economics at your fingertips  
 

Decentralized Lending and Its Users: Insights from Compound

Kanis Saengchote

No 162, PIER Discussion Papers from Puey Ungphakorn Institute for Economic Research

Abstract: Decentralized finance (DeFi) has recently gained much attention and scrutiny because of its rapid growth. DeFi services replicate traditional financial services such as lending, exchange, and asset management, but they are currently unregulated, unlike their traditional counterparts. We investigate Compound—one of the earliest and largest DeFi lending protocol—to show how it works, who the users are and the potential motivations behind their uses. We find that the loan durations are short (31 days on average), borrowing rates volatile and borrowers are concerned about liquidation risk. Further analyses reveal that some loan demand may arise from leveraged investment strategies. Taken together with the tacit leverage in DeFi yield farming, further availability of on-chain lending could potentially transpire into DeFi systemic risk.

Keywords: DeFi; Lending; Incentives (search for similar items in EconPapers)
JEL-codes: G10 G21 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2021-09
New Economics Papers: this item is included in nep-ban, nep-cwa and nep-pay
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://www.pier.or.th/files/dp/pier_dp_162.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pui:dpaper:162

Ordering information: This working paper can be ordered from
https://www.pier.or.th/en/dp/162/

Access Statistics for this paper

More papers in PIER Discussion Papers from Puey Ungphakorn Institute for Economic Research Contact information at EDIRC.
Bibliographic data for series maintained by ().

 
Page updated 2025-06-03
Handle: RePEc:pui:dpaper:162