Blockchain Papers

Woojin Jeong, Seongwan Park, Jaewook Lee, Yunyoung Lee · 5 authors

No abstract is available for this record.

Charlotte Eli, Hervé Alexandre

This paper introduces a novel framework for rate discovery in de-centralized finance (DeFi), focusing on the unique challenges andopportunities within decentralized lending platforms. We explorethe mechanisms of interest rate formation in a decentralized en-vironment, free from traditional banking institutions’ control. Byleveraging lending pool dynamics, we propose a method that inte-grates borrowers’ risk profiles with market liquidity conditions todetermine fair borrowing rates without third party involvment. Ourmodel aims to offer a transparent and reliable solution for rate dis-covery in DeFi. Through a series of simulations, we demonstratethe potential of our framework to improve lending practices in theDeFi ecosystem, making it a viable and competitive alternative toconventional financial systems. The findings suggest that our ap-proach not only enhances the transparency and fairness of the lend-ing process but also encourages a more informed participation oflenders and borrowers, ultimately contributing to the stability andgrowth of the DeFi market.

Jeffrey R. Black, Jobaer Hossain, Shawn McFarland

No abstract is available for this record.

Jinsha Zhao, J Miao

No abstract is available for this record.

Mathew Abraham

This study investigated the de-pegging effect of stable coins in the crypto market considering the increased growth in crypto lending using DeFi (Decentralized Finance).Employing an event study method and using the trading data of a select sample of stable coins and cryptocurrencies in more than two-year post-pandemic sample period (01 January 2021-30 March 2024), the study examined whether there was a spillover effect of stable coin crisis into the cryptocurrency market.The event study results showed that prior to the de-pegging event, there was a sharp decline in abnormal returns of both stable coins and cryptocurrencies.The univariate, event study and logistic regression estimations support the study predictions that the de-pegging event of USDC affected the crypto market adversely including the cryptocurrencies.Despite the claim of maintaining a pegged value, the stable coins were found to be prone to volatility mainly due to their involvement in DeFi lending.Although both USDC and DAI recovered fast and reached their pegged values of US$1, probably due to the immediate intervention of the FED in the March 2023 banking crisis, the recovery was short-lived.This is a lesson for crypto investors who patronize DeFi lending platforms in pursuit of yield farming and staking that stable coins are no longer stable as they claim to be, and they can be as volatile as cryptocurrencies.

Valeria Fedyk, De-Rong Kong, Daniel Rabetti

No abstract is available for this record.

Angelo Aspris, Jiří Švec

ABSTRACT Using comprehensive transaction level loan data for the MakerDAO protocol (2019–2023), this study investigates decentralized finance (DeFi) lending dynamics, focusing on the deter- minants of loan demand and the interplay between leverage, skill, and user performance. We document a counterintuitive positive relationship between the cost of borrowing and loan demand, consistent with yield seeking behavior. Moreover, blockchain- and protocol-specific frictions, such as gas fees shape borrowing activity. At the vault level, leverage universally reduces returns and amplifies liquidation risk, with unskilled users incurring significantly greater losses than skilled counterparts under extreme leverage. While skilled users mitigate moderate leverage risks through active management, excessive leverage erodes performance across all skill levels, with forced liquidations accounting for a significant proportion of this decline. The findings reveal critical trade-offs in DeFi permissionless architecture. While skilled participants exploit leverage strategically, systemic design features disproportionately penalize less sophisticated users.

Andrew Morin, Tyler Moore

No abstract is available for this record.

Andre Guettler, Oliver Padmaperuma

No abstract is available for this record.

Yu Zhang, Mostafa Chegeni, Claudio J. Tessone

The measurement of the velocity of money is still a significant topic. In this paper, we proposed a method to calculate the velocity of money by combining the holding-time distribution and lifespan distribution. By derivation, the velocity of money equals the holding-time distribution's value at zero. When we have much holding-time data, this problem can be converted to a regression problem. After a numeric simulation, we find that the calculating accuracy is high even if we used only a small part of the holding time data, which implies a potential application in measuring the velocity of money in reality, such as digital money. We also tested the methods on Cardano and found that the method can also provide a reasonable estimation of velocity in some cases.

Yuval Boneh

Decentralized Finance (DeFi) has reshaped the possibilities of reserve banking in the form of the Collateralized Debt Position (CDP). Key to the safety of CDPs is the money supply architecture that enables issued debt to maintain its value. In traditional markets, and with respect to the United States Dollar system, interest rates are set by the Federal Reserve in an attempt to influence the effects of excessive inflation. DeFi enables a more transparent approach that typically relies on interest rates or other debt recovery mechanisms being directly informed by asset price. This research investigates contemporary DeFi money supply and debt management strategies and their limitations. Furthermore, this paper introduces a time-weighted approach to interest rate management that implements a Proportional-Integral-Derivative control system to constantly adapt to market activities and protect the value of issued currency, while addressing observed limitations.

Kyrylo Bychkov

Since 2009, the process of creating virtual financial assets, in particular bitcoin, has been taking place in Ukraine, as in many countries of the world, and the scale of this activity is growing almost exponentially. The lack of state regulation creates the problem of lack of accounting and control of those negative effects on ecology and economy that arise in the process of creating virtual financial assets, i.e. mining. The work analyzes the findings of domestic and foreign scientists regarding the risks inherent in the creation of virtual financial assets, the main of which are the significant consumption of electricity produced from non-renewable sources, carbon and heat emissions, the use of clean water and the creation of electronic waste. Three stages in mining activity are defined and the problems of risk reduction inherent in each stage are defined. The first stage is decisive in terms of preventive actions regarding the risks that will arise in the next stage. At this stage, it is necessary to decide on the location of the equipment, the type of equipment that will be used in the mining process. In our opinion, providing mining with a unique code in KVED and introducing licensing of the specified activity are mandatory actions of the state on the way to reducing the risks associated with the creation of virtual financial assets. Licensing conditions must contain requirements for minimum energy efficiency, setting limits on the use of electricity and Internet traffic, and obligations regarding the safe disposal of electronic waste. At the second stage, it is important to choose the Proof-of-Stake consensus mechanism, which will allow you to save electricity. The third stage involves providing information on the type and amount of resources that were used during mining, as well as on the amount of carbon and heat emissions, during the release of the created assets to the market. This will enable investors to make informed decisions taking into account their attitude to environmental safety. The need for active actions by the state regarding the recognition of mining as a separate type of activity with its inclusion in the KVED and the introduction of licensing with the inclusion of requirements for reducing risks in miners’ activities in the licensing conditions is substantiated.

Yao Zhao

No abstract is available for this record.

Eugenio Cerutti, Jiaqian Chen, Martina Hengge

The rapid growth of crypto assets raises important questions about their cross-border usage. To gain a better understanding of cross-border Bitcoin flows, we use raw data covering both on-chain (on the Bitcoin blockchain) and off-chain (outside the Bitcoin blockchain) transactions globally. We provide a detailed description of available methodologies and datasets, and discuss the crucial assumptions behind the quantification of cross-border flows. We then present novel stylized facts about Bitcoin cross-border flows and study their global and domestic drivers. Bitcoin cross-border flows respond differently than capital flows to traditional drivers of capital flows, and differences appear between on-chain and off-chain Bitcoin cross-border flows. Off-chain cross-border flows seem correlated with incentives to avoid capital flow restrictions.

David Krause

No abstract is available for this record.

Randy Priem

No abstract is available for this record.

Randy Priem

No abstract is available for this record.

Pablo Azar, Adrian Casillas, Maryam Farboodi

This paper considers the "DeFi intermediation chain"-the market structure that underlies the creation and distribution of ETH, the native cryptocurrency of Ethereum-to examine how information asymmetry shapes intermediation rents.We argue that using proof-of-stake blockchain technology in DeFi leads to a novel limit to arbitrage, arising from the tension between arbitrageurs' privacy needs and blockchain transparency.Using a new dataset which distinguishes private and public transactions in Ethereum, we find that a 1% increase in private information advantage leads to a 1.4% increase in intermediaries' profit share.We develop a dynamic bargaining model that predicts information market power stems exclusively from participants' private information advantage.Our analysis illustrates how blockchain technology can sustain arbitrage opportunities despite low entry barriers.

Josephine Nartey

No abstract is available for this record.

Roberto de Vera, Yun-Hwan Kim

No abstract is available for this record.

David Andolfatto

The decentralized autonomous organization (DAO) represents a radically new way to manage databases. Since money and payments are all about managing databases and since banks play a central role in money and payments, DAO-based money and payments systems are potentially a disruptive force in the banking system—which includes central banks.

Durba Dutta

DeFi is a new concept that disrupts the conventional finance industry by employing blockchain and decentralized structures. This critical evaluation aims to discuss how DeFi can disrupt the banking system and provide more transparency, efficiency, and inclusion. Based on the literature review of the works of leading scholars and the DeFi platform case analysis, the study reveals that DeFi has certain benefits compared to traditional financial systems, including lower fees for transactions and a more open financial system for the population. Nevertheless, the research also identifies some threats that may impact the adoption of DeFi including regulatory challenges and security threats. The study shows that despite the fact that DeFi is capable of revolutionizing the financial services industry, it will have to coexist with the traditional banking sector and one has to look at the regulatory and security issues. As shown above, there are several problems that deserve more attention and only more research and collaboration between various stakeholders will allow to unleash the full potential of DeFi. This paper helps to enrich the knowledge about DeFi and its role in the new financial paradigm and gives some ideas about the future of financial industry.

Wei Jiang, Tao Li

Corporate governance encompasses a set of processes, customs, policies, laws, and institutions that affect how a corporation is directed, administered, or controlled. Technology both enhances and disrupts the traditional board-centric corporate governance system, enhancing efficiency and transparency while introducing new challenges and risks. In this work we examine three key themes comprehensively: the redefinition of information and information asymmetry through the generation of and access to big data; blockchain technology’s transformative potential for aggregating preferences and exercising shareholder voting rights while blurring the line between securities and tokens; and the impact of smart contracts and their underlying infrastructure on the expansion of contracts and the implementation of decentralized governance through decentralized autonomous organizations. These innovative technological solutions empower stakeholders to exercise governance rights effectively, but their complexity also gives rise to new barriers and inequalities. As technology evolves, collaboration among researchers, policymakers, and practitioners is imperative to ensure that corporate governance remains effective and responsive to the current dynamic business environment.

Aditya Kapoor

No abstract is available for this record.