2026-08-17T17:35:57Z https://drops.dagstuhl.de/oai

oai:drops-oai.dagstuhl.de:18422 2024-03-06T10:32:02Z ddc:004 open_access

Interest Rate Rules in Decentralized Finance: Evidence from Compound Chaudhary, Amit Kozhan, Roman Viswanath-Natraj, Ganesh Cryptocurrency decentralized finance lending protocols monetary policy stablecoins governance token We study the fundamentals of interest rate rules on the decentralized finance protocol Compound. Interest rates are set by the governance of the protocol, and are based on the utilization of an asset: which is the ratio of a cryptocurrency that is borrowed to its total supply in the protocol. We discuss factors that determine the slope parameters of interest rate rules. Slope parameters are typically higher for more volatile cryptocurrencies. We argue liquidation risk can explain the cross-sectional variation in interest rate rules. We also draw parallels between these rules to the demand for loanable funds in traditional money markets. Schloss Dagstuhl – Leibniz-Zentrum für Informatik Amit Chaudhary and Roman Kozhan and Ganesh Viswanath-Natraj 2023 Is Part Of OASIcs, Volume 110, 4th International Conference on Blockchain Economics, Security and Protocols (Tokenomics 2022) InProceedings Text doc-type:ResearchArticle publishedVersion application/pdf doi:10.4230/OASIcs.Tokenomics.2022.5 urn:nbn:de:0030-drops-184226 https://drops.dagstuhl.de/entities/document/10.4230/OASIcs.Tokenomics.2022.5 eng https://creativecommons.org/licenses/by/4.0/legalcode