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Understanding the DeFi Network Through the Lens of a Production-Network Model

Jonathan Chiu (), Thorsten V. Koeppl (), Hanna Yu and Shengxing Zhang
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Jonathan Chiu: Bank of Canada
Thorsten V. Koeppl: Queen's University
Hanna Yu: Bank of Canada
Shengxing Zhang: Peking University HSBC Business School

No 1509, Working Paper from Economics Department, Queen's University

Abstract: Decentralized Finance (DeFi) is composed of a variety of heterogeneous sectors that are interconnected through an input-output network of its tokens. We use a panel data set to empricially document the evolution of the DeFi network across its different sectors. We then employ a standard, theoretical production-network model to measure the value added and service outputs of different DeFi sectors which is fundamentally different from the commonly used metric of Total Value Locked (TVL). Our calibrated model is then used to study DeFi token prices and to predict the equilibrium effects of increasing network interconnectedness.

Keywords: Blockchain; Crypto; Decentralized Finance; Production Network (search for similar items in EconPapers)
JEL-codes: G2 L14 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2023-07
New Economics Papers: this item is included in nep-ban, nep-fdg, nep-net and nep-pay
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