Bank of Canada Paper: Fragility of DeFi Lending

BoC | Jonathan Chiu, Emre Ozdenoren, Kathy Yuan, Shengxing Zhang | Feb 22, 2023 This finding highlights the difficulty of achieving stability and efficiency in a decentralized environment without a liquidity backstop. We develop a dynamic model of decentralized finance (DeFi) lending that incorporates two/these key features: 1) borrowing and lending are decentralized, anonymous, overcollateralized

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