Why DeFi lending? Evidence from Aave V2

Giulio Cornelli, Leonardo Gambacorta, Rodney Garratt and Alessio Reghezza ()

No 19358, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Decentralised finance (DeFi) lending protocols have experienced significant growth recently, yet the motivations driving investors remain largely unexplored. We use granular, transaction-level data from Aave, a leading player in the DeFi lending market, to study these motivations. Our findings reveal that search for yield predominantly drives liquidity provision in DeFi lending pools, whereas borrowing activity is mainly influenced by speculative and, to some extent, governance motives. Both retail and large investors seek high returns through price speculation, however the latter engage in DeFi borrowing relatively more than the former also to influence protocol decisions and accrue more significant governance rights.

Keywords: Cryptocurrency; Decentralised Finance; lending (search for similar items in EconPapers)
JEL-codes: G18 G23 O39 (search for similar items in EconPapers)
Date: 2024-08
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Working Paper: Why DeFi lending? Evidence from Aave V2 (2024)
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