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สถาบันวิจัยเศรษฐกิจป๋วย อึ๊งภากรณ์
Puey Ungphakorn
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Call for Papers: PIER Research Workshop 2025
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15 September 2021
20211631664000000
No. 162

Decentralized Lending and Its Users: Insights from Compound

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.

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JEL: G10G21
Tags: defilendingincentives
The views expressed in this workshop do not necessarily reflect the views of the Puey Ungphakorn Institute for Economic Research or the Bank of Thailand.
Kanis Saengchote
Kanis Saengchote
Chulalongkorn University

Puey Ungphakorn Institute for Economic Research

273 Samsen Rd, Phra Nakhon, Bangkok 10200

Phone: 0-2283-6066

Email: pier@bot.or.th

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