Understanding DeFi Through the Lens of a Production-Network Model

Jonathan Chiu, Thorsten Koeppl, Hanna Yu and Shengxing Zhang

Staff Working Papers from Bank of Canada

Abstract: Decentralized finance (DeFi) is composed of a variety of heterogeneous sectors that are interconnected through an input-output network of its tokens. We first use a panel data set to empirically document the evolution of the DeFi network across its different sectors. Instead of looking at the misleading measure of total value locked, we then employ a standard, theoretical production-network model to measure the value added and service outputs of the different DeFi sectors. Finally, based on a calibrated version of our model, we study which factors drive DeFi token prices and predict the equilibrium effects when network interconnectedness increases.

Keywords: Digital currencies and fintech; Payment clearing and settlement systems (search for similar items in EconPapers)
JEL-codes: G G2 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2023-08
New Economics Papers: this item is included in nep-ban, nep-net and nep-pay
References: View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:bca:bocawp:23-42

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